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Soft vs. Hard Credit Inquiries

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You may have heard that checking your rate for a personal loan through LendingClub won’t impact your credit score. But traditionally, credit inquiries do impact credit scores.

So, how does it all work?
soft vs. hard credit inquiries infographic guide

Soft credit inquiries

We use something called a soft credit inquiry when you check your rate. A soft credit inquiry is when your credit report is checked by an individual or institution, but you haven’t technically applied for credit. It has no effect on your credit score, and only you can see soft inquiries on your credit report—no one else.

Here are some examples of when a soft credit check may take place:

  • For promotional or pre-approved credit card offers from a credit card company.
  • As part of a background check with a potential employer.
  • While tracking your own credit score through a financial literacy site like Credit Karma or Nerdwallet.

Companies like Credit Karma and Nerdwallet are relatively new, but credit card companies have been using soft inquiries to pre-qualify people for credit cards since the 80’s.

Hard credit inquiries

A hard credit inquiry, on the other hand, does show up on your credit report for others to see, and can negatively impact your credit score. Typically, a hard credit inquiry may stay on your credit report for two years. It’s the type of credit check that’s probably most familiar, and why you’ve learned to think twice when a retail store offers a credit card application at check out!

You can usually expect a hard credit inquiry when you request access to credit, for example a credit card, auto loan, or bank loan.

hard vs. soft credit inquiries guide
 

How it works at LendingClub

When you check your rate, we do a soft credit inquiry. That way we can offer you potential loan amounts and rates based on your credit history and other factors. You can check your rate with us as many times as you’d like, with no impact to your credit score. And only you will be able to see the soft inquiries on your credit report—no one else.

When your loan is approved and money is deposited into your account, then—and only then—we do a hard credit inquiry. This is to indicate that you have officially accessed credit through LendingClub after checking your options with us.

A loan that can improve your credit score

Many of our customers choose to get a loan through LendingClub to consolidate debt or get a better rate on existing high-interest debt. For those who do, the vast majority find that after just a few months their credit score improves significantly. For more on improving your credit score, check out our blog post with 5 easy tips.

What about outside of LendingClub?

It depends. You could have a hard credit inquiry or a soft credit inquiry for a host of scenarios, such as:

  • Applying to rent an apartment
  • Renting a car
  • Getting a cell phone contract
  • Signing up for internet or cable service
  • Requesting a credit card limit increase
  • Opening up a checking, savings or money market account

Because it’s not standardized, it’s a good rule of thumb to exercise discretion to make sure your credit score isn’t impacted unnecessarily. One way to be sure is to ask the company or agency directly.

For more about Hard vs. Soft Credit Inquiries, check out this TransUnion blog article on the topic.

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