Hard pull vs soft pull

[folks19]

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@RadioRob wrote:

One thing to keep in mind...  when managing credit pulls, financial institutions are not looking at "does this hurt their credit".  Their goal has nothing to do about YOU to be honest...  neither helping or hurting you.  

It's simply about measuring risk to THEM.  What is the chances that you could default on the credit line leaving them with a loss.  When economic times change, they (the banks) tighten the criteria they use for granting credit as a way of controlling loss and reducing risk/exposure.  What was perfectly OK just 6 months ago may no longer be good enough now.  

It's nothing personal against you and it's not a vendetta to tank scores, etc.  At the end of the day, it's simply risk management for the banks.

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@RadioRob I don't need you to tell me that the bank has no interest in helping or hurting me. I know that it's all about the bank's risk. But i'm just can't understand why would the bank choose to do a hard pull over a soft pull if they can get the same information through both?

One theory may be that they get less information through a SP, and then it makes sence to do a HP. But if they can get the same information with a SP, then why hurt the customers since there is nothing to gain from the HP?

[RadioRob]

Why would they do a hard pull versus a soft pull?

Simple... they're soft pulling you regardless of you asking for a CLI or not. The question for the lender becomes do they just use that last report they have for you such as what NFCU does. They could pull a new report and record it as an account review, which is more in line what Sync does. Or they could be more like Chase and record it as you seeking credit.

There is no difference in information they gain. Instead it's flagging it for other FI's as to what is going on. For example... I requested a CLI from Discover and was denied. Discover did not record that as me seeking credit. So no impact to me. However other FI's have no clue that I sought additional credit from Discover or the fact that Discover denied that additional credit. (If it would have been granted, obviously the change in limit would have been viewable once reported.).

Chase on the other hand is a hard pull regardless. Once I make that request for additional credit, regardless of the decision Chase makes, every one of my other creditors will know that I was asking Chase for new/more credit.

From a data analysis perspective, it's garbage in/garbage out for them. Chase want to know when you seek credit elsewhere and report the fact you are seeking credit from them to manage risk. They can't fully control what other FI's do, but they control what they do themselves.

Again, you are thinking in terms of "hurt". They don't care about "hurt" or what the impact is to you. They report hard pulls so others see what you are doing. It's about THEM.

[folks19]

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@RadioRob wrote:
Why would they do a hard pull versus a soft pull?

Simple... they're soft pulling you regardless of you asking for a CLI or not. The question for the lender becomes do they just use that last report they have for you such as what NFCU does. They could pull a new report and record it as an account review, which is more in line what Sync does. Or they could be more like Chase and record it as you seeking credit.

There is no difference in information they gain. Instead it's flagging it for other FI's as to what is going on. For example... I requested a CLI from Discover and was denied. Discover did not record that as me seeking credit. So no impact to me. However other FI's have no clue that I sought additional credit from Discover or the fact that Discover denied that additional credit. (If it would have been granted, obviously the change in limit would have been viewable once reported.).

Chase on the other hand is a hard pull regardless. Once I make that request for additional credit, regardless of the decision Chase makes, every one of my other creditors will know that I was asking Chase for new/more credit.

From a data analysis perspective, it's garbage in/garbage out for them. Chase want to know when you seek credit elsewhere and report the fact you are seeking credit from them to manage risk. They can't fully control what other FI's do, but they control what they do themselves.

Again, you are thinking in terms of "hurt". They don't care about "hurt" or what the impact is to you. They report hard pulls so others see what you are doing. It's about THEM.

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Sp you're saying that it's a matter of morality. Discover and other issuers' moral is to be "nice", and chase's moral is that they should report the person's credit seeking. Otherwise, why don't all issuers do a HP for CLI?

[RadioRob]

I would not use the term “morals”. I would say they want to know more information to assess risk. They also place more importance on different areas in measuring risk.

Chase places more value on knowing if you’re asking for credit than other FI’s do. If you ask them, they record it for everyone else to see.

Other FI’s may not use asking for more credit as much in their formulas for assessing risk and may just use the info they have about you already. They may choose not to take the effort to make sure other FIs have that info also.

We’re talking a lot about CLIs but even applying for credit can be this way. Once you have an Amex account, applying for another card with them is typically based on your last soft pull from them. They don’t value recording the fact you applied for a new account as much in their risk model. Obviously seeing a new TL would alert others you applied for credit but if you were denied, no other FI would be the wiser.

[folks19]

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@RadioRob wrote:
I would not use the term “morals”. I would say they want to know more information to assess risk. They also place more importance on different areas in measuring risk.

Chase places more value on knowing if you’re asking for credit than other FI’s do. If you ask them, they record it for everyone else to see.

Other FI’s may not use asking for more credit as much in their formulas for assessing risk and may just use the info they have about you already. They may choose not to take the effort to make sure other FIs have that info also.

We’re talking a lot about CLIs but even applying for credit can be this way. Once you have an Amex account, applying for another card with them is typically based on your last soft pull from them. They don’t value recording the fact you applied for a new account as much in their risk model. Obviously seeing a new TL would alert others you applied for credit but if you were denied, no other FI would be the wiser.

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I think that was helpful. So you are saying that banks that consider CLI as a higher risk, will also recored a CLI request as seeking credit, but a bank that sonsiders CLI requests as less of a risk when making a decision, may not recored a CLI request as seeking credit.

So in that case, does it have to do with the bank's opinion? meaning that one bank doesn't consider a CLI request as risky as another bank may?

[Anonymous]

Okay check it out first off there are multiple types of inquiries it’s not as simple as SP/HP. There are many type of soft inquiries. the promotional ones only get limited information, that you’re in a certain score range and your contact information.

The ones you’re talking about for CLIs are usually done as account reviews which give them the same information they get through an HP.

When you seek credit they are supposed to do a hard inquiry and it’s supposed to be recorded, so that other lenders know you have sought credit. Just like people, institutions are conservative and liberal and some fall somewhere in between.

Therefore you got Chase that plays by the rules, it’s always an HP. You have some lenders that say we don’t mind giving you a small increase based on an SP, but if you want it to be very large, then we’re gonna do an HP and give notice like we’re really supposed to.

So that’s why you see the trend of some of these lenders being nice and giving small increases based on a SP, but if you want it to be more they’re gonna require an HP and do their job and report it like they’re supposed to when you seek credit.

The scoring system only works if they report what they are supposed to. When they become a subscriber to a CRA, they have contractual obligations. They are probably supposed to report it whenever we seek credit. It maybe like the PFD deal, I don’t know?

Bottom line the lender decides if he’s gonna do it based on SP and if so at what level they're gonna require an HP. We gotta be thankful for what we get.