A hard credit pull is a traditional, formal inquiry that typically affects a consumer’s credit score. A soft credit pull is less formal, doesn’t affect credit ratings and can be used to give customers a sense of what degree of financing they can expect and what vehicle they’ll be able to afford.
Soft pulls can be requested by customers, as May said he did, or conducted unilaterally by a lender or dealership to find and market to qualified car buyers. Unsolicited soft checks, known as prescreens, create an obligation to honor the preliminary financing terms available to a customer if a formal check shows similar creditworthiness, according to Experian. Customer-authorized soft pulls, known as prequalifications, don’t require a firm credit offer, Experian says.
May filled out a soft credit application on World Kia Joliet’s website on Aug. 16, 2021, according to the suit. He said he wished to avoid a hard inquiry and the online application promised not to affect his credit.
World Kia Joliet responded with an estimated loan amount, loan term and interest rate it said could be available. May also received a call from a dealership salesperson who asked him for some additional information, including May’s Social Security number.
May’s lawsuit alleges a salesperson filled out a credit application for him while they discussed a car purchase, and “the agent stated that Plaintiff’s credit application was ‘good.’ ” But the application hadn’t actually been approved, May claims in the suit.
May said he received a notification from Credit Karma that the dealership had made a hard inquiry into his TransUnion credit report. He said he thought written consent would have been required for World Kia Joliet to do this, but he didn’t press the issue out of a desire “to maintain a friendly business relationship.”
Jean Noonan, a partner at law firm Hudson Cook, told Automotive News written consent isn’t necessary for a hard credit pull in response to a credit application. In the absence of an application, a company can conduct either a soft or hard pull for certain permissible reasons, she said. However, credit bureaus often require written consumer consent before they’ll release a report on a nonapplicant, Noonan said.
However, if a dealership conducted a hard pull after telling the customer a soft inquiry with no credit impact would be performed, the retailer could be exposed to an allegation of deceptive behavior, she said.
Noonan said it is a good idea for dealerships to alert consumers who approve a soft pull and apply for credit that the application would mean a hard pull.
O’Loughlin said while the dealership might have a legally permissible purpose to pull someone’s credit, it’s best to get customer consent in writing in case a dispute occurs. Otherwise, “the dealer does take some risk,” he said.