A frustrated man looking at paperwork

What Is a Hard Credit Pull?

Most customers feel worried when they hear the phrase “credit check,” and for good reason. They’ve probably heard that too many credit applications at once can actually reduce their credit scores by five points or more and possibly reduce their chances of getting a loan. But applying for equipment financing through Clicklease won’t hurt their credit: we use a soft credit inquiry, not a hard credit inquiry.

This difference matters to your customers, and explaining the difference between a soft and hard credit inquiry can put their minds at ease. Here’s the difference between these two types of credit inquiries and how to explain them to your customers.

The Difference Between Hard and Soft Credit Inquiries

Credit pulls come in two different flavors: hard and soft. The difference depends on whether there’s a repayment risk attached to the inquiry and how much information the party requesting the credit information gets.

Technically speaking, hard credit pulls relate to traditional lending that involves a lot of money over a sustained period of time. This type of credit inquiry is probably what your customer thinks of when they picture “getting a loan.” Hard credit pulls include credit history and credit score and requires written permission. Some common examples include:

  • Mortgages
  • Rental applications
  • Credit card applications
  • Student loans
  • Business loans
  • Some utility applications

However, a soft credit pull might only include credit history, not credit score, and can be done in advance of contacting your customer. Pre-approved credit cards and other loans usually rely on soft credit pulls. Other examples include:

  • “Prequalified” credit cards
  • Auto insurance
  • Background checks for employment
  • Checking your own credit report

Hard Credit Pulls Hurt Credit Scores

A hard credit check can damage a credit score, especially if someone applies for several loans over a short period of time. Why? The reason boils down to statistics: credit scoring services have found that people who frequently take out multiple loans are more likely to default on their payments. They’re a bigger risk to lenders, and that risk is reflected in a lower credit score.

But for some credit-challenged customers, hard credit pulls can become a self-defeating cycle. They know they have a low score already, so they’ll be extra cautious about applying for anything that involves a hard credit inquiry—chances are, they’ve been burned before and damaged their score while still not getting approved for the loan.

Customers who have already experienced rejections need extra encouragement to try again. Fortunately, point-of-sale financing can help them avoid a hard credit pull and still get the equipment they need for their small business goals.

A Soft Credit Pull is Risk-Free for Customers

When your customer applies for financing through Clicklease, it’s a soft credit check. Our algorithm incorporates credit score plus overall credit history and various other factors to process approvals within minutes. Because there’s no hard credit inquiry, applying is risk-free—there’s no cost and no credit score damage. Plus, we offer more approvals and faster processing than traditional lenders that rely on manual underwriting to evaluate applications. Your customers are more likely to get approved and get a response quickly when they finance their purchase through Clicklease.

Make sure your customers know there’s financing available without submitting to a hard credit pull—they don’t have to damage their credit score to get the equipment they need, and you’ll get paid in full as soon as the loan is funded. Let’s get started.

The content linked to clicklease.com has been compiled from a variety of sources and should not be considered the official position of Clicklease, its Employees or Officers. Data and opinions included are provided for convenience, may contain errors or omissions, and consequently should not be relied upon for making business or investment decisions. Clicklease encourages its site visitors to use the information provided at their own risk, and recommends visitors do their own direct research.