Small business financing is essential for the growth and success of any business, but it can also be a confusing and overwhelming process. One crucial aspect is the difference between a hard and a soft credit pull. Both types of credit checks can affect your credit score differently.

Understanding the difference between the two can help you make an informed decision when applying for financing and can also help you avoid any potential negative impact on your credit score.

What is a Hard Credit Pull?

A hard credit pull, also known as a hard inquiry, occurs when a lender or creditor requests a detailed credit report from one of the major credit reporting agencies (Equifax, Experian, or TransUnion) as part of a loan or credit application. This type of credit check is typically done when you apply for a mortgage, car loan, personal loan, or credit card. The lender will use the information on your credit report to determine your creditworthiness and the likelihood that you will be able to repay the loan.

When a lender performs a hard credit pull, it can hurt your credit score. This is because each hard pull can lower your score by a few points. It can be seen as a red flag if you have multiple hard pulls in a short period.

What is a Soft Credit Pull?

On the other hand, a soft credit pull, also known as a soft inquiry, occurs when a lender or creditor requests a summary of your credit report for pre-approval offers or to check your creditworthiness. Unlike a hard pull, a soft pull does not negatively impact your credit score because it is not considered an application for new credit. Credit card companies, lenders, and even landlords typically do this type of credit check when you apply for pre-approval or pre-qualification.

Credit Scores & Financing Terms

For small business owners, it’s essential to be aware of the difference between the two types of credit checks. When applying for a loan or credit, ask the lender if they will do a hard or soft pull. Consider the potential impact on your credit score and weigh the benefits of the loan or business financing against the potential negative impact.

Some lenders offer pre-qualification, a type of soft pull that can give you an idea of your chances of being approved for a loan or business financing without affecting your credit score. This can be a valuable option for small business owners considering applying for financing.

Moreover, having a good credit score is crucial for small business owners, as it can help qualify for better loan/financing terms and interest rates. A good credit score benefits you in obtaining financing in the future. That’s why it’s important to be mindful of the number of hard pulls on your credit report and try to limit them as much as possible.

Minimizing Impact on Credit Scores

To minimize the impact on your credit score, it’s important to be strategic about when and where you apply for financing. For example, you should avoid applying for funding from multiple lenders at the same time, as this can have a negative impact on your credit score.
It’s also important to know the financing terms you’re applying for. Some lenders may require a hard credit pull as a condition of the loan or financing, while others may allow you to submit a soft credit pull instead.


In summary, as a small business owner, it’s crucial to understand the difference between a hard credit pull and a soft credit pull when applying for financing. By being strategic about when and where you apply for funding and being aware of the terms of the loan or financing, you can minimize the impact on your credit score and increase your chances of being approved.

We do not conduct hard credit pulls or inquiries, apply for fast, simple, and secure financing with us now and get financing in 24 hours.

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