January 21, 2022 Last updated January 21st, 2022 1,012 Reads share

How Soft Pulls Can Affect Your Business

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If you own a business, you must be thinking of ways to increase your customer base. The typical way businesses today do this is through marketing and advertising. But did you know that there’s another surefire method to get potential customers?  

When businesses consider adding new customers, they often turn to consumer data aggregators for help in pinpointing potential new customers. While this isn’t always necessary, it’s an option that many small business owners don’t even know exists.   

Businesses can find out all kinds of information about potential new customers by doing a soft pull on their credit reports. It’s a request for information that does not affect the customer’s credit score. In the former years, you need to contact the credit agency directly. Today, Application Programming Interface Integration (API) companies allow businesses to use API for credit reporting with a few clicks of the mouse: 

 

What is a Soft Pull?  

A soft pull is when you ask for information about someone’s credit without them knowing it’s coming from you. It’ll show up on the consumer’s credit report as another inquiry, but it is not sharable with the business that requested it. Since the consumer does not have to provide this information, they are likely to give you accurate data when you’re doing a soft pull.  

 

How Exactly Do Soft Pulls Work?  

You can access credit reports through credit bureaus online or over the phone. To use Equifax as an example, you would go to their website and enter the consumer’s primary information. If they consent, you can also get addresses and employment history.   

Once you have the credit report in front of you, you’ll be able to see all kinds of information about the individual. It’ll include a list of credit inquiries, including soft pulls. You’ll also be able to see detailed information about the individual’s credit history, including any delinquent accounts or bankruptcies.   

 

How Can Soft Pulls Affect Your Business?  

Understanding how soft pulls work is essential for two reasons: first, it can show you whether a company is being truthful about their creditworthiness, and second, it can tell you if they’re attempting to get approved for other lines of credit. In either case, this information can help your business make better decisions:  

  • Shows Credit Worthiness Of A Company/Consumer 

The first way a soft pull can help you as a business owner is by giving you an idea of a company’s creditworthiness. If you’re looking to do business with a company, it’s necessary to know if they’re a responsible lender. A soft pull can tell you this information without affecting the company’s credit score 

For another example, if a customer claims that they’re pre-approved for a line of credit, you can do a soft pull on their consumer report to see if they have any delinquent accounts or past bankruptcies. If someone has been approved elsewhere and is applying elsewhere, your business may want to conduct a soft pull yourself; this way, you already have the information about their creditworthiness.  

  • Helps You Know If They’re Applying For More Credit 

The second way a soft pull can help you as a business owner is by helping you determine if your customer is applying for other lines of credit. If they are, this could indicate that they’re in financial trouble or that there’s potential for them to fail to pay on another account.  

For example, if a customer comes in with a good credit score, only to request that you approve a line of credit for them, a soft pull will show you this information. If they have a bad credit score and are already maxing out their existing lines of credit, the soft inquiry won’t affect their credit score (it won’t raise or lower it).  

  • Helps You Make Better Credit Decisions 

The third way a soft pull can help you as a business owner is by giving you a picture of how likely someone will repay their debt. This information can be beneficial if you’re considering granting someone a line of credit or if you want to extend them an existing line of credit.  

When you make a soft inquiry on someone’s credit report, you can see how long they’ve held their current lines of credit and what types of accounts they have. This information will help you decide if they’re a good candidate for further credit.  

  • Helps Prevent Identity Theft 

The fourth way a soft pull can help you as a business owner is by helping prevent identity theft. Before you approve someone for any credit, it’s essential to do your research and ensure that they’re not applying to take out several different types of credit under various names. If someone has opened up ten credit cards in the past year, it’s probably a good idea to check their consumer report to see if they’ve opened up any other accounts in another name.  

  • Protects Your Business From Identity Theft 

As much as you want to protect your customers’ personal information, businesses are responsible for protecting their identities and credit scores. If someone is stealing someone else’s identity to take out a bunch of credit in their name, your business could be held liable.  

When you conduct a soft pull on someone’s consumer report, you’re not just looking at their credit score. You’ll also see other information in their consumer report, like whether they’ve been reported as an identity theft victim in the past. 

 

When Do You Conduct A Soft Pull?  

A soft pull should be conducted anytime you need to see your customer’s credit score but not to affect it. When someone wants a line of credit, when they ask for an invoice, etc., are all times when you can conduct a soft pull. For example, if someone is applying for just one or two accounts and they’re under USD$10,000 or so, you can run a soft pull to see if they’re creditworthy. 

 

When Should You Not Conduct A Soft Pull?  

One of the biggest reasons for conducting a soft pull is when someone is applying for multiple lines of credit, and their total amount exceeds USD$10,000 (or whatever the limit might be). For instance, when an individual is applying for a mortgage, the lender will hard pull their credit score to get a more in-depth look at their credit history.  

If you’re not sure whether or not you should conduct a soft pull on someone’s credit report, it’s always best to be especially careful rather than taking a risk. By conducting a soft pull, you could be opening yourself up to potential legal troubles if the person applying for credit isn’t the person you think they are. In business, it’s crucial to stay on top of all the latest changes in the law.   

 

Benefits Of Doing A Soft Pull  

The benefits of doing a soft pull include: 

  • You can get a good idea of someone’s creditworthiness before extending them credit. 
  • You can find out if creditors have blacklisted someone. 
  • You can see if someone is trying to open multiple lines of credit under different names. 
  • You can collect additional information, such as email and mailing addresses, that you can use to help create or enhance your marketing campaigns.  
  • You can do all of these without affecting the customer’s credit score. 

 

Information Revealed In A Soft Pull 

The following information can be revealed in a soft pull: 

  • Name 
  • Social Security number 
  • Date of birth 
  • Address history 
  • Employment history  
  • Credit card and loan accounts (including delinquencies and bankruptcies)  
  • Public records (such as liens, judgments, and tax defaults) 

Since you can see what kind of credit is available to each individual, it’s also possible to make an educated guess about their credit score.  

 

Common Types Soft Inquiries  

It’s important to remember that soft inquiries do show up on your business’s consumer data aggregator report, so it’s essential to make sure you understand what kind of impact they can have.  

These are some common types of soft inquiries and their associated businesses:  

  • Credit bureaus Some credit bureaus compile and sell your credit report to businesses.
  • Retailers: When a person applies for a credit card, the retailer will make a soft inquiry on their credit report. 
  • Car dealerships: When applying for a car loan, the dealership will make a soft inquiry on the applicant’s credit report.
  • Cellular providers: When a person signs up for a new cellular plan, the service provider will make a soft inquiry on that person’s credit report.
  • Mortgage lenders: When someone applies for a mortgage, the lender will make a soft inquiry on their credit report.
  • Creditors (banks and credit card companies): Creditors often make a soft inquiry when a person is pre-approved for a credit card or loan.
  • Employers: Some employers will make a soft inquiry on a credit report as part of the background check process.
  • Insurance companies: Insurance companies will often make a soft inquiry on a credit report of someone applying for a new policy.
  • Credit Repair Clinics: When seeking credit repair services, a credit repair clinic will often make a soft inquiry to pull their consumer report.
  • Collection agencies: When a creditor or collector has placed someone on their’ claims list,’ they will make a soft inquiry on the individual’s credit report. 
  • Marketing research companies: Marketing research companies might make a soft inquiry on an individual’s credit report to get information about potential customers. 
  • Political organizations: Political organizations may pull consumer reports before they make political donations or offers of employment. 

 

Takeaways  

In running an effective business, it’s crucial to assess the risk that comes with extending credit. By understanding how soft pulls work, you can better decide who to extend credit and how much credit to extend. It can help you avoid bad debt and keep your business running smoothly.  

When looking at a credit report, it’s necessary to understand the difference between a hard inquiry and a soft inquiry. As the name implies, soft inquiries don’t hurt the individual’s credit score. Hard inquiries do affect an individual’s credit score.  

Credit scores can range from 300 (very bad) to 850 (perfect). It’s important to note that soft pull data will only be on your business’ consumer report if it’s kept there by the company itself.  

By understanding how soft pulls can affect your business, you’re taking an important step in protecting yourself and your customers. 

 

Gabriel Simmons

Gabriel Simmons

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