What Are The Trade-offs Between Soft Pulls and Hard Pulls for Credit Card Applications?

Every credit card application flow will include some sort of bureau data request, often called a credit "pull". There are multiple kinds of credit pulls: "hard" and "soft". What type you use and when may seem like a subtle difference, but, as is a theme in lending, nuances can have outsized impacts. How and when you pull credit will impact your conversion, customer experience, and risk management.

First, at a technical level:

• Soft pulls give you access to a consumer’s credit file (tradelines, credit history, credit score, Delinquencies, utilization, and credit mix) without impacting their credit score.

• Hard pulls are the traditional method used for credit decisions—they show up on the consumer’s report, are visible to other lenders, and may lower their score by a few points. Only hard pulls typically trigger adverse action requirements if you decline the applicant.

Many applicants, especially younger and credit-sensitive ones, are wary of hard pulls and will abandon an application when they hit the "this will impact your credit score" disclosure. Using a soft pull instead can significantly improve conversion at the application stage and the quality of your applicant pool (friction in your application can lead to adverse selection).

Soft pulls can be more convenient for the lender, too. Because soft pulls don't require formal adverse action letters as long as the decision isn't final, you can sort applicants quickly and cleanly, prequalifying the applicants you want to ultimately approve.

So why doesn't everyone just use soft pulls? There are a few things to keep in mind:

• You’ll likely still need a hard pull to finalize approval and open the account, depending on your sponsor bank’s policy.

• Credit models trained on hard pull data may need recalibration to perform well on soft pulls.

• You’ll need clear user disclosures and tight integration with your LOS and credit policy to avoid compliance issues.

The best application flows, therefore, are strategic about where they place each pull. Many lenders use a two-step flow: prequalification with a soft pull followed by account opening with a hard pull. This can get you the conversion and selection benefits of a smooth application while meeting compliance requirements. This two-step flow requires some additional "housekeeping":

• Separating marketing prequal logic from credit decisioning logic.

• Working with your sponsor bank to align on where credit decisions are actually made.

• Building your credit policy to document and govern the use of soft pull data.

We work with fintech teams launching credit card products, often from scratch. If you’re thinking about using soft pulls in your application process, we can help you do it right.