Those who have applied for a small business loan, taken out a mortgage, or signed up for a business credit card, know what credit check or credit inquiry is. A credit inquiry helps lenders and financial entities determine whether you can be eligible for loans or whether they can approve you for home rental, credit card, and so on.

Credit Inquiries and Credit Scores

Credit inquiries stay on credit reports for a maximum of 24 months (2 years). They’ll only affect your FICO credit score for a maximum of 12 months. To get a better idea of how credit inquiries impact your credit, you should understand the types of credit inquiries.

Credit inquiries are of 2 types: hard credit pulls and soft credit pulls. Each of them has a different impact on your credit report. Depending on the type of loan you’re applying for, multiple credit inquiries can damage your credit.

In case, you have bad credit or no credit at all, you should apply to a reputable business funding provider like First American Merchant to get approved for small business loans with no credit check. Firstamericanmerchant.com is an award-winning alternative online lender and payment processor that specializes in the high risk industry and boasts an A+ rating with the BBB. Poor credit or no credit isn’t a problem for FAM.

What’s a Soft Credit Pull?

A soft pull doesn’t stay on your credit report and doesn’t impact your credit report negatively. It can be performed without your permission. A soft pull occurs when a company approves you for a credit card or applies a background check. For example, an employer might perform a soft inquiry before hiring you so to see whether you have a sense of responsibility or not since your creditworthiness serves as an indicator of this.

Examples of Soft Pull:

  • Reviewing your own credit report
  • Background check from your employer
  • Being pre-approved for credit card or loan offers
  • Verifying your identity

What’s a Hard Credit Pull?

The reason lenders or banks perform a hard pull is to determine your creditworthiness. A hard pull occurs when you apply for a loan, mortgage or credit card. It accounts for the most impact on your credit. Because of a hard pull, your credit score can go down over time. A hard pull stays on your report for up to 2 years. You should always give your permission for this. So, you can almost always expect a hard pull when you’ve signed, sealed, and delivered a credit application.

Examples of Hard Pull:

  •        Applying for an auto loan, student loan or business financing
  •        Applying for a new credit card
  •        Getting approved for a mortgage loan
  •        Opening a new checking or savings account
  •        Requesting a loan or credit increase
  •        Signing a cell phone contract

To Dispute Hard Pulls You Didn’t Approve, You Should:

  • Contact the creditor
  • Support your claim by providing additional documentation
  • File a dispute
  • Make copies of your claim
  • Follow up after 30 days

A hard credit pull can indicate you have a financial problem. If you take out multiple applications for funds in a short time span, you’ll be considered risky. Avoid applying for credit or loans that give you a minimum chance of successful approval. Keep your credit report in a good state and keep the amount of hard pulls under control so to increase your chances of getting the necessary loan for your business.

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