It’s been a difficult few years for the economy, but even more so for people’s financial situations and livelihoods. Many small businesses were hit hard by the pandemic; people lost work, and prices of goods and services continue to rise. As a result, keeping your credit score in good form has become a difficult challenge. There are still some great tips to improve your credit score, even during lockdown so you can work towards your goal of getting a car, a home or a loan.
When you’re applying for a job, an apartment, or a loan, the institution you’re going through is likely going to run a credit check. They want to make sure you’ll be able to repay your loan, but the unfortunate fact is these checks can be limiting to those who need money the most.
There are many things to know about your credit, and while it can be difficult to understand, the important distinction everyone should know is the difference between a soft and hard credit check. A hard credit check has the ability to have a negative effect on your credit, so if you have too many it can look poor on you. Keep reading to learn the differences between these two types of credit checks:
Soft Credit Check
Almost every creditor or financial institution wants to know how you manage your debt and credit, including how many late payments you have or what your credit usage looks like. To do this, they can run a soft credit check, which is also known as a “soft-pull”. This is a report they can review to view your score and get a general sense of how effectively you are managing your credit and debt. A soft inquiry can happen when you’re applying for a job, credit companies sending you offers or if you apply for any pre-approvals for a loan or mortgage.
Some benefits to a soft inquiry into your credit history is that it gives you a better understanding of how you’re doing and what you can do better. Some credit card companies offer free credit score assessments or there are some websites you can sign up to view your information as often as you like. Remember that while they don’t impact your credit score, they are listed on your report.
Hard Credit Check
You should always examine what kind of credit check is being done, regardless of what you’re applying for. A hard credit check, also known as a “hard pull” or “inquiry” can impact your credit score greatly. A hard inquiry can happen when you’re filling out an application for a new credit card. They also happen when you apply for a car loan or mortgage. When someone does a hard pull on you, it has the potential to harm your credit score. A pull like this may show up on your credit report for a few months or it could last about two years.
Some people say the reason why creditors do this is they assume that if you’re applying for more credit you might be at risk of paying it and the others back. It’s the most formal of credit checks in comparison to the soft credit check.
If you’re having issues with your credit or your report doesn’t come back in your favor, there are things like authorized user tradelines that can help put you back in the green. This involves having someone sign or support your credit with theirs, and it’s one of the ways to acquire a debt consolidation loan for people with bad credit. There are many companies or people out there to help you navigate this arena, so do some research in your area to find which ones will be best for your needs.