Credit Facilities

How Do Soft Credit Checks Work

Credit checks happen 24/7, every day of the year, worldwide. From auto dealerships to apartment blocks, legal services, and even marketing campaigns, credit scores and reports are constantly generated on the fly and give businesses the information they need.

But not all credit checks are equal in their scope and implications. “Hard” credit checks are infamous for their impact on credit scores, making many consumers skeptical of this process. In addition, many businesses miss out on opportunities because they rely too heavily on hard credit checks to scare off potential acquisitions.

On the other hand, a “soft” credit check can be used far more tactfully and deliver all the benefits you need as a business or institution. Customers also benefit from getting what they want from the transaction without unwanted stress or strain.

Soft credit checks are the better of the two options in most transactional settings, and they should be part of your arsenal as a small business in a wide variety of sectors.

Let’s learn more about soft credit checks, how they work, and how to perform them on a larger scale to a more significant effect while keeping risk low.

Soft Credit Checks: The Basics

The best way to understand how soft credit checks work is to relate them too hard credit checks and recognize the differences.

First, recognize that every credit check – hard or soft – is performed with a function and the desired outcome by both parties involved. For example, someone looking for an auto loan wants money for a new car, while the lender wants to make sure that their money will come back on time with the appropriate interest for profit.

The concept is simple enough, and it powers many industries across the economy. However, soft credit checks are unique because of how they’re used and what it means for the process participants.

Here are some key distinguishing features that make soft credit checks unique and offer some insight into how they work.

Unrelated to New Credit

The simplest definition of a soft credit check is a credit report inquiry that doesn’t involve an application for a new line of credit.

While hard inquiries are notorious for their toll on credit reports (counting for 10% of your score), a soft inquiry does not have the same impact because it does not involve granting new credit.

Of course, there are times when hard credit checks are unavoidable, and consumers must understand this and proceed accordingly. However, as a general rule, businesses should utilize soft credit checks when a new line of credit isn’t in question.


The power of pre-approval can be a game-changer for a small business when attracting new customers to an offer. This is one of the best implementations of soft credit checks because it operates behind the scenes and offers an intriguing marketing hook.

Since soft credit checks aren’t seen on credit reports and don’t make an impact on consumer scores, they’re also completely legal and ethical in this context. In addition, pre-approval for certain types of loans (in a certain value range) can benefit everyone when used correctly.

Background Checks

New employment, new tenants, or other situations may call for soft credit checks to get a better picture of an individual’s history and tendencies.

Many organizations will do these types of background checks to protect themselves and others from risk. However, it’s a part of doing business and ensuring safety for all and must be done efficiently at scale.

Who Uses Soft Credit Checks?

Knowing the basics about soft credit checks, you can start to piece together just how vital this process is in our everyday economy. Here are a few familiar industries that use soft credit checks to stay on top of their game.


Financial technology moves rapidly, and soft credit checks are key to keeping the gears turning. As a result, fintech companies are raising the bar for accurate consumer lending products that require soft inquiries – while maintaining a fast pace.

This is where technologies like a soft credit check API can be a powerful fintech solution for companies with high processing volumes.

Bankruptcy Lawyers

The legal ecosystem relies heavily on background checks, especially in sensitive situations involving bankruptcy. Attorneys need a clear picture of a client’s financial situation and must get the info quickly without making matters worse.

Tenant Screenings

Property managers need a quick and scalable method to get tenants into their buildings without taking on unnecessary risk. Soft credit checks performed at scale allow owners to start generating revenue quickly while staying protected.

Debt Consolidation

With so many consumers in debt, consolidation companies help make sense of the situation and create a productive path forward. In addition, these institutions protect clients by utilizing soft credit checks while getting all the necessary information.

Use Soft Credit Checks to Your Advantage

There is a time and place for soft credit checks, and certain companies benefit significantly from this approach. First, see if soft credit checks make sense for your business, then implement a user-friendly solution that works fast and scales with ease.

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