When you agree to let someone run a background check, sometimes they’ll also ask for your permission to consider your credit history. However, you may have heard that too many credit history inquiries actually lower your credit score, making it harder for you to open credit cards or apply for loans.
In general, background checks-including SafetyPIN’s evaluation process-will not impact your credit score. That’s because background checks do something called a “soft inquiry” or a “soft hit” on your credit history, instead of a “hard inquiry” (or a “hard hit”). But what does that mean?
The Difference Between Soft and Hard Inquiries on Your Credit History
Hard Inquiries Request More Credit
When you want to open up a new credit card, apply for a mortgage loan, or try to finance a car in the United States, the bank or business you want to borrow money from will request your credit history from one of the three major credit bureaus: Equifax, Experian, and TransUnion. They will use this information to judge whether or not you’ll be able to pay back the loan, based on your previous financial history.
This type of credit history request is known as a “hard inquiry” or a “hard hit” on your credit report, because you’re actively asking for more money.
Generally speaking, the impact these hard inquiries have on your credit score is relatively small (less than five points). However, many hard inquiries in a relatively short period of time can throw up a red flag to lenders. Statistically speaking, those with six or more hard inquiries on their credit reports can be eight times more likely to declare bankruptcy [https://www.gocleancredit.com/how-many-hard-inquiries-will-affect-your-credit-score/], compared to those with no hard inquiries at all. You can see how hard inquiries might impact your chances of getting loans on good terms!
Soft Inquiries Only Show Financial History
On the other hand, background checks and SafetyPIN’s own financial review uses what are known as “soft inquiries.” They ask for a person’s financial history from the same credit bureaus, but not for financial reasons like applying for a loan. Therefore, soft inquiries do not impact someone’s credit score, though they are recorded on the credit history.
Rather than trying to justify a new credit limit or loan, soft inquiries are used to prove someone’s financial responsibility and previous history of repayment. For example, a landlord would be reassured to see a prospective tenant has a history of paying their previous rent on time. A history of bankruptcies on someone’s financial record might make a company nervous when hiring, say, a bookkeeper.
How SafetyPIN Uses Your Credit Report
While we don’t know exactly what every background check company looks for in your credit history, we can tell you how SafetyPIN uses your credit information!
At SafetyPIN, we don’t have a specific credit score in mind when we review your financial history. Ultimately, we’re looking for patterns of potentially risky behavior that would make someone more likely to commit fraud or other financial crimes. That’s because people use SafetyPIN to better trust the people they interact with. A huge part of that trust is counting on someone to not steal from you or abuse finances-which means they have to know you’re financially stable. That doesn’t mean rich…it just means you’re managing your finances responsibly (enough).
We take our responsibility to our SafetyPIN holders very seriously and will never do anything to make it harder for them to get a job or to get credit.
So, if you were worried about a background check negatively impacting your credit score, we hope we’ve cleared things up for you! Background checks in general-and applying for a SafetyPIN specifically-will not lower your score and keep you from moving forward with your financial goals.