You hear about apps and websites offering free credit scores all the time these days, which is great! These educational credit scores allow regular people to keep a closer eye on a very important part of their finances. However, people often run into the issue where the credit score they are seeing in their app is not the same as the credit score that is pulled by a lender when it’s time to apply for a loan. The reason for this is because there are two types of credit report inquiries, soft and hard.
What is an educational credit score?
The credit score you are given in a free credit score app or website is referred to as an educational credit score. It is intended to help you monitor your credit score more regularly and educate you on ways to improve your credit score. (Not going to lie, most of them are also just trying to sell you a credit card too.) That being said, an educational credit score can be very useful in helping you identify possible fraudulent activity or other errors that maybe showing up on your credit report that don’t belong to you. Educational credit scores are calculated using what is known as a soft credit inquiry.
What is a soft credit inquiry?
Your educational credit score is calculated off of what is called a soft credit inquiry. A soft pull of your credit looks at your past performance, it is not necessarily indicative of what you did today. It can be up to about 30 days behind depending upon the credit bureau providing the credit score. A soft credit inquiry usually looks briefly at the following information:
- past payment patterns, such as number of late versus on-time payments
- number of credit lines you have open or recently closed
Soft credit pulls do not “ding” your credit score like it does when a lender pulls your credit, thus it will not affect your credit score to obtain your educational credit score through a free credit score app or website. This type of credit score inquiry is also frequently used for things like background checks or pre-approval offers you get in the mail. This is because your permission is not required to access your credit information via a soft credit pull.
What is a hard credit inquiry?
When a lender looks at your credit score they are completing what is known as a hard credit inquiry. A hard credit inquiry allows the lender to look at your activity to date and requires your permission to pull this information. This is because a hard credit inquiry will leave a mark on your credit report. Generally the effect is negligible, but too many in a short period of time can negatively affect your credit score more significantly. A hard inquiry looks much closer at your various trade lines and past performance than a soft credit inquiry will, thus the reason they are not always the same even if pulled from the same credit bureau. A lender will only complete a hard credit inquiry when you are applying for a new trade line, such as an auto loan, mortgage, credit card, etc. If you are requesting a pre-approval they will do a soft pull first.
Can you trust the credit score from a free credit score app or website?
Yes, the educational credit score you see in your free credit report tool is a trustworthy resource for keeping tabs on the health of your credit score. Even though it may not be exactly the same credit score as you would get with a hard credit inquiry, the information presented should still accurately reflect the credit lines you have open and your past payment history. Regularly keeping track of your credit score and your credit report is a healthy financial habit to get into. The best way to keep track of your credit is a combination of using free credit score tools and annually reviewing your free credit report from each of the three credit bureaus from annualcreditreport.com. This ensures you are knowledgeable about what is showing up on your credit report and how your credit score may be affecting the rest of your finances.