Every year, millions of people use personal loans for many reasons, from consolidating debt to paying for weddings or emergencies. Nonetheless, some consumers are hesitant to apply for a personal loan for fear it may hurt their credit score. If you’re one of the hesitant, we have good news. You can check what your personal loan interest rate could be without any harm to your credit and without any commitment to apply.
What Is a Soft Credit Inquiry? What Is a Hard Credit Inquiry?
It’s important to understand the difference between 2 different types of credit inquiries: a soft credit inquiry and a hard credit inquiry.
A “soft credit inquiry” includes credit checks such as:
- checking your credit score online
- employer background check
- applying to rent a home or apartment
A soft credit inquiry won’t impact your credit at all.
A “hard credit inquiry” on your credit report generally occurs when you apply for:
- credit cards
- auto loan
- personal loan
A hard credit inquiry could affect your credit.
While those are just a few examples, do your research prior to any major financial decision to ensure which type of credit inquiry may occur.
While new credit only accounts for 10 percent of your credit score, sometimes a few points can make the difference between hundreds or thousands of dollars in additional interest payments over time. Other factors in your credit score include the amount of credit you’re using, your payment history, and length of your credit history.
The Best Way to “Check Your Rate”
Before applying for a personal loan, you can now check your interest rate without impacting your credit because some lenders view your credit report using a soft credit inquiry to prequalify you and to let you know your approved interest rate.
For example, Discover Personal Loans now offers the Check Your Rate feature to let you know your rate, using a soft credit inquiry. The rate is good for up to 15 days. You can easily return to where you left off online or call Discover to accept the rate and apply for the personal loan within the 15-day period.
If you miss the 15-day offer period, not to worry. You can always Check Your Rate again.
With this new tool, lenders are empowering consumers with more information to make sound borrowing decisions.