Rohit Mittal is the co-founder and CEO of Stilt. Rohit has extensive experience in credit risk analytics and data science. He spent years building credit risk and fraud models for top U.S. banks. In his current role, he defines the overall business strategy, leads debt and capital fundraising efforts, leads product development, and leads other customer-related aspects for the company. Stilt is backed by Y Combinator and has raised a total of $275M in debt and equity funding to date.See all posts Rohit Mittal
Soft Pull Personal Loans: What They Are + Your Options
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Navigating credit is challenging, particularly for those new to credit scores and their impact. Many people struggle with poor or no credit, which complicates loan approval and credit improvement due to lenders’ and bureaus’ stringent policies. Loan application processes can be perplexing, but don’t worry—we’ve simplified it for you. Continue reading to understand soft credit checks, how they differ from hard checks, and discover lenders that offer soft-pull personal loans.
Want to jump to the lenders that allow you to prequalify for a personal loan with a soft credit check?Click here
What is a Soft Credit Check?
A soft inquiry is a type of credit check that doesn’t count negatively towards your credit score. It is not shown on your credit report. The person or company doing the soft inquiry checks your credit report as a background check, such as when you would apply for a lease or a personal loan.
Soft inquiries do not affect your credit score and can be useful if you want to if you are approved. If you get approved with a soft inquiry personal loan, you can compare the rates and terms of the loan before moving forward with a lender. If you have bad credit and don’t want your score to be negatively affected, then a soft inquiry loan might be the right option for you. It’ll keep your credit safe in the long run.
Can You Get a Loan With Only a Soft Credit Pull?
When applying for most personal loans, a hard credit check, which is a thorough review of your credit history, is usually part of the complete application process. However, to get prequalified for a loan, a lender will often conduct just a soft credit inquiry.
Prequalification is a preliminary step in the personal loan application process. During this stage, a lender assesses your potential eligibility for a loan by performing a soft credit check, which doesn’t impact your credit score.
Although prequalification doesn’t guarantee approval and the estimates provided may not be exact, it does give a preliminary indication of whether your financial status appears sufficient for loan repayment.
Should you choose to move forward with the loan application after prequalification, be prepared for a hard credit check. This is a more in-depth review that will affect your credit score to some extent.
What is a No Credit Check loan?
A no-credit-check loan is a type of loan offered by lenders, such as payday loan companies, that do not evaluate an applicant’s credit report or score before issuing a loan. These loans are generally for smaller amounts—usually up to a maximum of a few thousand dollars—and are aimed at covering urgent expenses or bridging temporary income gaps. They are characterized by their short repayment schedules, which can range from a few weeks to a couple of months.
The absence of a credit history review implies a higher risk for the lender, which is typically counterbalanced by charging significantly high annual interest rates. The combination of steep interest rates and short repayment terms can make these loans challenging to pay back on time. This may result in borrowers becoming caught in a cycle of debt as they struggle to meet the repayment demands.
Be Careful: No credit check loans can be Predatory
Watch out for unfair loan terms when agreeing to a soft inquiry loan. Many predatory lenders focus solely on credit, and not at all on the borrower’s ability to repay the loan. Be sure to do your homework and figure out all that the soft inquiry loan entails before agreeing to it.
Keep an eye out for:
- Payday Lenders
- High-interest rates
- Loans bigger than you can realistically afford to pay back
5 Soft Pull Personal Loans
When considering a personal loan, many are wary of the potential negative impact that a hard credit inquiry can have on their credit score. Opting for lenders that offer a soft credit check during the initial application process can alleviate these concerns, providing an initial assessment without affecting one’s credit. Here’s a closer look at lenders that align with this approach:
Spring Loans (Best for Bad Credit and No Credit)
Understanding the challenges that come with limited or negative credit history, Spring Loans offers a soft credit check to ensure that applicants aren’t further disadvantaged by the loan-seeking process. Their approach provides a sense of assurance to those with bad or no credit, allowing them to explore financial solutions without the fear of diminishing their credit even further.
First Premier Lending (Best for Bad Credit)
For those with credit missteps in their past, First Premier Lending offers a compassionate approach. Recognizing the value of maintaining one’s credit health, they provide potential borrowers with a soft credit check option, enabling them to consider loan possibilities without the repercussions of a hard inquiry.
AmOne (Best for Okay to Good Credit)
AmOne is geared towards individuals who have moderate to good credit scores and are cautious about the footprint hard inquiries can leave. Offering a soft credit check means applicants can get a glimpse of their potential loan terms with AmOne without committing fully or damaging their credit profile. This process allows borrowers to make an informed decision, balancing their loan needs with their credit health.
Upgrade (Best for Good to Great Credit)
Upgrade caters to individuals with commendable credit who are nonetheless vigilant about their credit’s well-being. Their soft credit check feature allows applicants to assess potential loan terms and rates without making a lasting mark on their credit report. This ensures that those with good to great credit can maintain their scores while seeking out the best financial solutions.
BestEgg (Best for Good Credit)
BestEgg, catering to those with good credit, understands the importance of preserving one’s credit standing. By offering a soft credit check during the initial phase, applicants can gauge the feasibility and attractiveness of a loan with BestEgg, all while keeping their credit history untouched and uncompromised.
Soft Inquiry vs. Hard Inquiry: What is a Hard Credit Pull?
A hard pull is another type of credit score check that will affect your credit report. This type of credit check occurs when you authorize a lender (whom you’ve applied for credit with) to review your credit report. They do this so that they can make a decision on the type of loan they can provide you. Hard pull issuers often include financial institutions such as credit card companies and other lenders.
Hard pulls are usually used when credit checks are acquired for various credit card issuers and loans, and for mortgages. Be wary of how often you allow your credit report to be drawn up, as hard pulls always affect your credit and decrease your FICO score.
If you have no credit history, it’s generally better to avoid hard pull credit inquiries, as they are likely to be denied right away.
Does a Hard Pull Hurt My Credit Score?
Yes. A hard pull inquiry will appear on your official credit report and can be listed as an error or negative item on your credit score, bringing it down. Dropping credit scores from negative credit history mean higher interest rates when you borrow.
Other factors decrease credit scores, such as missed/late payments or charge-offs and collections. However, it is extremely common for individuals to have negative marks on their credit history from hard pull inquiries.
Some Examples of Soft and Hard Inquiries
The key difference between soft and hard credit checks, aside from how they affect your credit score, is permission.
A lender can perform a soft inquiry without your permission. A lender must have your permission to do a hard inquiry, though.
Below, we’ll look at some examples of both.
Common Soft Inquiries
These, again, are credit checks that a lender does not need a borrower’s permission to perform. They include:
- Property Rental Applications
- Credit Card Applications
- Student Loan Applications
- Auto Loan Applications
- Personal Loan Application
Common Hard Inquiries
A hard credit inquiry is just the opposite situation of a soft credit inquiry—it does require a borrower’s permission to perform.
- Checking your credit scores on Credit Karma
- “Pre-qualified” credit card offers
- “Pre-qualified” insurance quotes
- Employment verification (i.e. background check)
How to Dispute a Hard Credit Check
It’s a good practice to check your credit reports regularly to make sure that there are no errors in the reporting.
If you do find an error in your credit report, it can be disputed by getting in touch with the credit bureau in question or by contacting the Consumer Financial Protection Bureau.
An important note to make here is that you cannot, under any circumstances, dispute a hard inquiry that you gave permission for.
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Armed with this info, you should have no problem finding a soft credit check personal loan that meets your needs without wrecking your credit!
Be sure to do your research, try getting as many loan offers as you can (assuming they all use soft credit pulls), and only take out a loan that you can afford the monthly payments for.