When you apply for a loan, you know that lenders evaluate various criteria, such as your credit score, to make a loan decision. But did you know that when you apply for a loan, the type of check the lender performs can affect your credit score?

Understanding the difference between a hard and soft credit inquiries, or "pulls", will help you maintain your credit score when applying for loans.

A "hard pull" is often performed when a financial institution, such as a lender or bank, checks your credit report when deciding whether to lend to you. More in-depth applications, such as those required for credit cards and mortgages, require hard inquiries. Hard inquiries show up on your credit report, can drop your overall credit score, and can even remain on your credit report for up to two years.

A "soft pull" is often used by non-bank entities, such as potential employers or landlords, who use the information listed on your credit report to supplement their own background check or screening. Non-bank payday lenders will often use "soft pulls" during the application process. A soft inquiry can be performed without your explicit consent. While soft inquiries do not affect your credit score, they can be recorded on your credit report.

If you cannot immediately tell whether or not a lender will perform a hard or soft inquiry, don’t be afraid to ask! Being proactive is the best way to prevent your credit score from suffering unnecessarily, and luckily, checking your own credit report will not affect your credit score.

Visit our friends over at Credit Karma for an easy-to-follow guide to hard and soft credit inquiries.