Applying for a business loan can feel overwhelming, especially when you are unsure how credit checks work. Understanding the difference between soft vs hard credit check​ is essential for understanding how lenders evaluate your financial history and how it may affect your credit score. The good news is that not all credit checks are the same—some allow you to explore your financing options without affecting your credit, while others are part of formal loan approvals and can temporarily lower your score.At Purple Tree Funding, we guide business owners through both soft and hard credit checks, helping you make confident, informed decisions to secure the best funding solutions for your business growth in 2025.
A credit check is the process lenders use to review your financial history and assess your reliability in repaying borrowed funds. This evaluation influences critical loan details, such as:Loan approval: Will the lender approve your application?Loan amount: How much money can you borrow?Repayment terms and interest rates: What conditions suit your risk profile?Lenders perform two types of credit checks:
Knowing the difference helps you plan loan applications strategically, protecting your credit score while increasing your chances of approval. For a detailed explanation of lending terminology, see our loan terms guide.
Lenders perform credit checks to understand your financial history and assess the risk of lending to you. This information helps them make key decisions about your loan, including:
Knowing the difference between soft credit check vs hard credit check​ is important. It allows you to plan your loan applications carefully and avoid unnecessary damage to your credit score, giving you a better chance of securing the financing your business needs. Pro Tip: Understand the difference between APR and interest rate to compare loans effectively with our APR vs interest resource.
A soft credit check provides a low-impact way to review your credit profile. It’s not a full review and does not affect your credit report. Soft checks give lenders a quick idea of your financial situation, helping them determine if you might qualify for a loan or financing, without any risk to your credit.
These situations demonstrate how soft checks enable you to explore options safely before taking any formal steps. At Purple Tree Funding, business owners can utilize soft-pull prequalification to verify loan eligibility without impacting their credit score. This process is quick, simple, and requires minimal documentation, giving you the confidence to explore financing options while protecting your credit.
A hard credit check, also known as a hard pull, is a more thorough review of your credit history. Unlike a soft check, a hard check is done when you formally apply for a loan, credit card, or other financing. It shows lenders your full financial history and can temporarily affect your credit score.
If you submit multiple applications within 2–6 weeks, most scoring systems treat them as one inquiry. This allows you to compare rates without hurting your credit score. Understanding hard checks helps you plan your loan applications carefully and avoid unnecessary risk to your credit while accessing the funds your business needs.
Knowing how hard credit check vs soft​ work is just the starting point. The bigger question is why these checks are important for your business financing decisions. Lenders use credit checks to understand your ability to repay a loan and the overall financial health of your business. They may review both personal and business credit reports, especially if your business is new or has a limited credit history.Soft checks are useful for exploring options without risk. They allow you to see which loans you might qualify for, compare lenders, and estimate rates without affecting your credit score. Hard checks, on the other hand, occur during formal loan applications. Too many hard checks in a short period can signal risk to lenders, potentially lowering your credit score or affecting loan terms.Being aware of which type of check is being performed helps you:
By understanding how each type of credit check works and its impact, you can approach financing with confidence and strategy, ensuring your business receives the necessary funding while protecting your financial health.
Using a soft credit check strategy before submitting hard applications can save your credit from unnecessary hits. Now that you understand the difference between hard vs soft credit checks in business lending, you can make more informed financing decisions. To make it more clearier, using a soft pull strategy allows you to explore loan options, compare lenders, and understand your approval odds without affecting your credit. Meanwhile, being aware of hard pulls and how to manage them ensures your credit remains healthy when applying for formal financing.Below is a quick comparison to highlight the main differences between soft vs hard credit checks: TypeWhenImpactVisibilityUseSoft CheckPrequalification NonePrivateExplore, compareHard CheckApplicationDropsPublicFinal Approval By starting with a soft-pull prequalification at Purple Tree Funding, you can confidently explore multiple loan options without risking your credit score. This approach provides a clear view of potential terms, allows you to compare lenders side by side, and helps you understand your approval odds before committing to a full application. Take advantage of this risk-free strategy today and make informed financing decisions that support the growth and stability of your business. Learn which financing option suits your business best with our secured vs unsecured loan comparison.
Securing business financing doesn’t have to be confusing or risky. Using the right approach to credit checks can make the process smoother and protect your credit. Soft checks allow you to explore multiple loan options, compare lenders, and get a clear picture of potential terms without impacting your score. When it’s time to apply formally, hard vs soft credit checks in business lending play a critical role in how lenders assess your eligibility and terms. Pre-qualify today with a soft pull and explore financing options confidently without affecting your credit score. Let Purple Tree Funding help you find the right funding solution for your business goals.
Q1. Does a soft credit check affect my credit score?No, soft credit checks do not impact your credit score or appear to other lenders.
Q2. How much can a hard pull reduce my credit score?Typically, a hard credit check can reduce your score by 5 to 10 points temporarily.
Q3. How long do hard credit checks stay on my report?Hard inquiries remain visible on credit reports for up to two years but usually only affect your score for about one year.
Q4. Can multiple loan applications hurt my credit?If you apply to several lenders within a short period (2–6 weeks), most scoring models group these hard inquiries as one, minimizing score impact.
Q5. Should I apply to lenders offering soft prequalification first?Yes, using soft prequalification reduces risk to your credit score and allows you to compare loan offers before formally applying.
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We help all sizes, but you’ll usually need 6+ months in business and $20K+ monthly revenue to qualify.