Hard vs Soft Credit Check and Why that Matters for Your Patients

A credit check, also known as a credit inquiry or credit pull, is a process that allows a lender or creditor to assess an individual’s creditworthiness and financial history. It helps them determine whether to approve a credit application, such as for a loan, credit card, or rental application. Credit checks can be categorized into two main types: hard credit checks and soft credit checks.

Hard Credit Check (Hard Inquiry): A hard credit check occurs when a lender or creditor reviews your credit report as part of an application for new credit. This is usually done when you’re applying for a credit card, a loan (such as a mortgage, auto loan, or personal loan), or a new line of credit. Hard inquiries are more comprehensive and detailed, providing the lender with a thorough overview of your credit history, including your payment history, outstanding debts, account types, and any recent credit applications.

Key points about hard credit checks:

  • They can slightly lower your credit score: Each hard inquiry can have a small negative impact on your credit score, typically causing a decrease of a few points.

  • They stay on your credit report: Hard inquiries remain on your credit report for up to two years, but their impact on your score diminishes over time.

  • They indicate new credit applications: Multiple hard inquiries within a short period could suggest to lenders that you’re seeking credit from multiple sources, potentially making you appear risky.

Soft Credit Check (Soft Inquiry): A soft credit check occurs when your credit report is accessed for reasons other than applying for new credit. These checks are less detailed and do not affect your credit score. Soft inquiries are commonly used for background checks, pre-approval offers, and by individuals who are monitoring their own credit. Some examples of situations where soft credit checks are used include checking your own credit score, employer background checks, pre-approved credit offers, and landlord rental applications.

Key points about soft credit checks:

  • They don’t impact your credit score: Soft inquiries do not affect your credit score in any way.

  • They’re not visible to lenders: Lenders can’t see soft inquiries when reviewing your credit report for lending decisions.

  • They’re often used for informational purposes: Soft inquiries provide a general overview of your credit history without delving into the specifics.

Because a hard credit check negatively impacts your credit score, if your dental practice offers or is considering offering patient financing, try to work with a patient financing provider that only conducts soft credit checks. This way, if a patient were to get a mortgage, apply for a new credit card, etc, they won’t get dinged from applying for a loan with your office. Certain financing providers such as Cherry only have soft credit checks for their patient application process.