Mar 26, 2024
Each year, millions of people use personal loans for many reasons, from home improvements and consolidating debt to paying for weddings or emergencies. Perhaps you’ve been considering a personal loan but think that applying for one may hurt your credit score.
This is an understandable concern. While new credit only accounts for 10% of your FICO® Credit Score,* sometimes a few points can make the difference between hundreds or thousands of dollars in additional interest payments over time.
If you’re still unsure, we have good news: you can easily check what your interest rate may be for a new loan without harming your credit score, and without any commitment to apply. The way you do this is through what’s called a “soft credit pull,” as opposed to a “hard credit pull.”
A soft credit pull, also known as a soft inquiry, is like a snapshot of your credit health. When lenders do a soft credit pull, they are looking for a review of your credit report based on information from major credit bureaus. Since it’s not attached to an actual application for credit, a soft credit pull will not affect your credit score at all.
A soft credit pull may occur when
A hard credit pull, or a hard inquiry, is linked to an application for financing from a lending institution. It will be visible to other creditors. It could also affect your credit score because it shows that you are applying to borrow money from a lender.
A hard credit pull on your credit report generally occurs when you apply for
Each hard credit inquiry remains on your credit report for two years, but your FICO® Credit Score only considers the last 12 months.
Do your research prior to any major financial decision so that you know in advance which type of credit pull may occur. The lists above don’t cover every type of soft or hard credit pull.
Soft credit pull |
Hard credit pull |
|---|---|
When you check your credit score or report |
When you apply for credit |
When checked by others for preapprovals |
When checked by others for loan approvals |
No permission is required |
You must give your permission |
Visible only to you on your credit report |
Visible to others on your credit report |
Will not affect your credit score |
May temporarily affect your credit score |
Some personal loan lenders will prequalify you by looking at your credit report using a soft credit pull. This way, they can let you know the interest rate you may receive if approved. Prequalification doesn’t guarantee loan approval. It’s a win for both sides. The lender gets insight into your creditworthiness, while giving you more information to make sound borrowing decisions.
Discover® Personal Loans, for example, offers a soft credit pull to let you check your rate and calculate your monthly payment based on your requested loan amount and repayment term. It’s quick, easy, and won’t harm your credit score.
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Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
*FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries. Discover Financial Services and Fair Isaac are not credit repair organizations as defined under federal law or state law, including the Credit Repair Organizations Act. Discover Financial Services and Fair Isaac do not provide “credit repair” services or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating.
