As of the date of this post, they state that they do do a "soft" pull (if you apply, and look at "Why" they need your social secuity number on the application, they specifically say that it's to access your credit repor. No hard inquiry would appear on any bureau they use, and your credit score would not be affected. To some extent, they can choose what information they want to receive in a soft pull, but it's general. Basically, it's the same type of pull that credit card companies that say they can "pre-approve" you for a card do and, perhaps more significantly, what companies like Axciom do when they provide lists of prescreened information to credit card issuers. Thus, they may be able to check your credit score, as well as a list of general criteria that they may request via a soft pull. I do not believe they use ChexSystems, EWS, or any other type of check database. They state that part of the reason they do a soft pull is to verify your identity. They can use the results of the soft pull any way they want; that is, not just to approve or decline you for their debit card. That's why the person who applied and was refused because his/her identity couldn't be validated had his/her PayPal account temporarily suspended.
The evolution of the PayPal Debit Card--and PayPal in general, really--is quite something. Back in 2000, when ChexSystems had recently started, the PayPal Debit Card was a suggestion for those who were having difficulty getting bank accounts. That's because when they first started, they really didn't require any identifying information for either a PayPal account or a PayPal Debit Card. The only requirement was that you had to have a PayPal account in good standing for two months before you were eligible for a PayPal Debit Card (this is no longer required). If you did, you were automatically approved, and no identifying information, such as date of birth or social secuity number was required. This remained true for many years--I would say through around 2007, although that's a rough guess. Sometime after that, the requirement that one had to have a PayPal account in good standing for two months still applied, but when you applied for the Debit Card they did ask for information that could be used to verify your identity, but identity verification was the only factor used for approval (they didn't do any soft pulls, or use any credit report data). If you think about it, it is pretty amazing that they were able to issue Debit Cards for so many years after the Patriot Act was passed without verifying anything at all. If fact, I don't think it was until around 2006 or 2007 that they even pulled a credit report if a person had a PayPal Business Account, and requested a merchant account through PayPal (allowing people to accept credit and debit cards directly).
As time passed, they altered their terms, and now they have the right to pull a credit report on anyone who opens a Premier or Business PayPal account. This doesn't mean that they always do, just that they maintain the right to do so.
PayPal accounts provide most of the benefits that they always have (any offer many more, particulary for Business Accounts)--predominantly as both a money-transfer service, and a payment mechanism for both buyers and sellers; however, one significant change that they've made within the past year or two is that now one can't add money from a bank to a PayPal account without providing information that allows them to identify you as provided by Patrot Act rules. In fact, they're now so strict that you can't even add money to your account via a Green Dot MoneyPak without providing such information. Another feature that they used to offer that's now totally gone, (ended around four years ago), was the ability to create virtual debit card accounts with the money you had in your PayPal account. If I remember correctly, you didn't even have to have a PayPal Debit Card to access this feature. Presumably, this was stopped because of higher than acceptable fraud levels, although given how they've changed, I think it might now be doable again without signficant risk. Also, in the very early days, until a little before or a little after it was acquired by eBay, PayPal also used to offer a Bill Payment Service.
It should also be noted that there's a PayPal Prepaid Debit Card. This Card is currently issued by Netspend, and is a totally different product from the PayPal Debit Card. As with most prepaid cards, there's no credit check, although identity verification is required. While this Card doesn't provide nearly as many benefits as the PayPal Debit Card, you can transfer up to $300 per day / $2,000 per rolling 30-day period instantly from your PayPal account to this Prepaid Card. Of course, a person can have both the PayPal Prepaid Card as well as the PayPal Debit Card. A PayPal account is not necessary to obtain the Prepaid Card, although it provides a good incentive to holders who don't have a PayPal account to open one.
Because both the PayPal Prepaid Card and the PayPal Debit Card are just that--debit cards--your "performance" on these Cards are not reported to credit bureaus, and thus have no affect on your credit. The only possibility that your credit would be affected is if you overdraw your PayPal Debit Card for an extended period of time, in which case a collection account might result and could appear on your credit report.
If you look at PayPal overall through the years, it's really gone full swing--it used to be a haven for those who could obtain a Debit Card and even a Merchant Account without having to be subject to the identity requirements of the Patriot Act, which I always considered somewhat amazing. But now it's gone full swing into compliance and further--since they may now even deny a request for a PayPal Debit Card based on their credit requirements. That's something that's still unusual for a bank where you have a checking account to require (although, of course, most banks now have criteria that a person must pass before a checking account is opened).
