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Good car value estimates will factor in as many as a dozen data points, including geographic and economic influences. Less precise tools base estimates only on make, model, year, and mileage. If you’re looking to sell your car, or you’re in the market for a used vehicle, it’s important to familiarize yourself with how automobile valuations work.

Here’s what you need to know to help you increase your chances of getting the best deal.

What to Know About Instant Dealer Trade-In Quotes

A number of dealerships and websites — such as Carvana, Vroom, Truecar and Kelley Blue Book — offer instant cash or instant dealer trade-in quotes for your car. Often, all you have to do is share a few details, such as the vehicle identification number (VIN) or license plate number, and the company will come back to you with a cash offer for your vehicle.

Though a lot of companies make it sound like the process is as simple as that, know that there is likely an in-person review of your vehicle before anyone will cut you a check.

Recommended: What Credit Score is Needed to Buy a Car

What Do Dealers Base Their Car Estimates On?

Instant quotes and valuations usually look at a few quick measures, such as year, make and model, and mileage. This information is enough to provide a rough estimate of value. However, other factors will also come into play. Here’s a closer look.

(Keep in mind, these terms apply only to cars you own outright; different calculations go into valuing a leased car.)

Make and Model

You can think of the make and model of a car as the brand and the specific product on offer. For example, Toyota is a make of vehicle, while the Corolla is a model. Some makes and models are more popular, which helps them hold their value longer. For example, a certain make and model might be known for fuel efficiency or to be safer or more reliable.

There may be numbers or letters next to a car’s make and model that further delineate different features or trim level. Generally speaking, the higher a vehicle’s trim level — the more features it has — the more valuable the car will be.

Recommended: How to Buy a Used Car

Style

A vehicle’s body style is its shape. It might be a minivan, hatchback, or pickup truck. Information about a vehicle style is contained in its make and model. And certain styles are more valuable than others. For example, trucks tend to retain their value better than other car styles. In other words, they depreciate more slowly.

Condition

Your vehicle’s condition means both cosmetic issues like scratches, dents, and wear to upholstery, and also the wear and tear on the engine and other components. The better condition a car is in and the fewer impending repairs needed, the more valuable it will be.

Mileage

Mileage is an important factor to consider because it serves as shorthand for potential wear and tear. The more a car has been driven, the more likely it needs repair or will soon. As a result, cars with smaller odometer readings are worth more.

Accident History

Accidents big and small will hurt the value of a vehicle. Even if a car was in a minor accident and shows no outward signs of damage, value can decrease. Buyers can look up vehicle history reports on sites such as Carfax and AutoCheck, using a car’s VIN.

Car Add-ons

When you buy a car new, you may be offered a series of add-ons, such as splash guards, alarm systems, and tinted windows. While these are often pricey to add to a new vehicle, that doesn’t always translate into increased value for used cars. In fact, according to some experts, once a car is two or three years old, add-ons have little effect on its value. Condition, mileage, and accident history often matter much more to the average used car buyer.

Number of Previous Owners

Used cars that have been owned by only one person may be seen as preferable because the vehicle will have had a consistent driving history and maintenance schedule. Multiple owners will not necessarily hurt the value of a car, but it may raise a red flag if there have been many owners in a short period of time.

Warranties

If a car is still under warranty and that warranty is transferable to a new buyer, it can add value.

Location

Geography can have an effect on car value. For example, the harsh winters and salted roads of the Northeast can take a toll, causing more wear and tear than a warm, dry climate.

Additionally, some types of vehicles may be in higher demand in certain areas, driving up price. For example, you might have an easier time selling a pickup truck in a suburban or rural area than in a big city.

Timeline

The less time an individual has to sell their vehicle, the more likely it is that they may have to accept an offer that’s less than the fair market value, especially in areas where there is not much demand.

The Economy

The value of used vehicles can fluctuate with changes in the economy. For example, supply chain issues and increased consumer demand over the course of the COVID-19 pandemic drove up the price of new and used vehicles. The median price of used vehicles jumped 44% between December 2019 and December 2021.

Rising interest rates can also make borrowing to buy a vehicle more expensive, putting downward pressure on demand, as can a struggling stock market.

Recommended: What Credit Score Is Needed to Buy a Car?

What Buyers Are Looking For

Ultimately, supply and demand drive the value of used vehicles. If buyers are looking for hybrid vehicles over gasoline-only cars, value for hybrids increases. If a certain color falls out of favor, a car may end up being worth less than an otherwise identical model in a different hue.

Recommended: What is The Difference Between Transunion and Equifax

How to Prepare Your Car and Your Expectations

Prepare your car for the highest valuation by tackling as many repairs as you can, from fixing a broken brake light to replacing worn out brake pads. Before an in-person valuation, you’ll also want to have your car washed and detailed to make sure it looks like it’s in the best condition possible.

Manage your expectations for values by doing a bit of research. If you’re looking to sell your car, check out valuation estimates from multiple sources, including Edmunds, Kelley Blue Book, and online dealers. You may even want to bring your car to a local dealership to see what price you might get there.

Similarly, if you’re looking to buy, you can look up the value of various makes and models to help you understand whether the price you’re quoted is close to fair market value.

Recommended: Does Net Worth Include Home Equity

Monitor Your Car Value With SoFi

Good car value estimates will factor in as many as a dozen data points, including geographic and economic influences. Tracking your car’s value is especially important as you plan your budget and save up for a new car. The reason: Your current car’s value can have a big impact on what you can afford in a new or used car.

SoFi’s money tracker app now has an Auto Tracker feature that can give you a better understanding of your net worth and help you identify good times to sell.

SoFi’s new Auto Tracker: Discover real-time vehicle values in just a few clicks.

FAQ

What is the best way to determine the value of a car?

Find out the value of a car through trusted online resources such as Kelley Blue Book or Edmunds. Enter the VIN, license plate number, or the year, make, model, and mileage of your car or truck to get an idea of what it may be worth.

Which car value estimator is most accurate?

Kelley Blue Book and Edmunds are two of the most trusted car value estimators.

How do you know if a car deal is too good to be true?

Red flags that may suggest a car deal is too good to be true include a seller who is rushing you, a seller who won’t give you an accident report, signs of rust or disrepair, and a price that is much too low compared to fair market price.

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Photo credit: iStock/Talaj

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Global inflation and supply chain issues have derailed a lot of people’s post-COVID plans, including renovating or remodeling their homes. The cost of remodeling and renovating has risen partly because there’s a shortage of supplies, so retailers have raised prices on the supplies and materials they do have. Plus, the Federal Reserve Bank has raised interest rates in an effort to slow inflation, meaning home improvement loans cost more. This doesn’t necessarily mean homeowners must put off renovations, but it does mean that sticking to your home reno budget may require more creativity and planning.

How to Keep Inflation From Ruining Your Home Renovation Budget

Here are some strategies for keeping inflation from blowing your home reno budget:

1. Understand Renovation vs Remodel

People use the terms renovation and remodel interchangeably, but they are not the same thing. A renovation is fixing up what’s already there; a remodel is changing what’s there. That may mean expanding a room, or converting a pantry to a breakfast nook. Remodeling is usually more expensive because it is more involved and can include the need for permits, whereas renovations are often smaller projects that you can sometimes DIY. Before getting started with either, it can be smart to budget for the level of transformation you can reasonably afford in this economic climate.

2. Invest Wisely

One thing experts agree on is that the best home renovation or remodel investments are projects that can raise the value of a home at resale. Some of these projects include a kitchen or bathroom makeover, expanding outdoor space, and even just replacing the garage door. SoFi’s home improvement ROI calculator can help you identify some of these home investment opportunities.

3. Finance Carefully

Since you’re investing in your home, especially with the idea of improving its value, it’s smart to look for the right partner to help you strategize how to finance your project. It’s possible your project may be eligible for a home equity loan where you borrow against the value of your home for funds. Another financing option is a personal loan. Unlike the home equity loan, a personal loan for home improvement projects requires no collateral.

💡 Learn more about how home improvement loans work.

4. Have a Plan

Home renovation projects notoriously run over budget. Global supply chain issues are making that even worse. Many projects must happen according to a specific sequence, like receiving a delivery of plumbing supplies and scheduling workers before you gut the bathroom. If something goes wrong with the sequencing, it might mean you lose your workers to another job that’s ready to go, or you have to pay extra to expedite shipping. These hold ups can be expensive. That’s why it’s important to plan meticulously before you begin.

5. Be Flexible

Can’t get the Italian granite you were eyeing for the kitchen counters? What about slate, which can be a fourth of the price and can look just as stunning. Or Sintered Stone? Or steel? Deciding from the beginning to be flexible on the things you can, and uncompromising only on the materials or designs that really matter to you, can save you thousands.

6. Consider High Quality Items

Because there is generally lower demand for slightly higher quality and pricier items, those appliances and materials haven’t risen as much in price . So you might have an opportunity to get something you might have considered out of your price range for about the same as the more standard one.

7. Oversee the Project

The typical contractor fee for most general contractors to oversee renovation projects is 20% of the project , so if you’re planning a $50,000 remodel and you do the contracting yourself, you could save $10,000 right off the bat. But it will be your job to source and schedule the experts you need — plumbers, electricians, etc. — and oversee the work. Just remember: It’s not uncommon to pay to have a job done twice during renovations, so it’s wise to stay on top of workers if you choose this option.

8. Do Something Yourself

Using skills you already have, or picking up a few through online videos and in-person workshops, can save you some time and money. If you decide you can do the job yourself, and it isn’t one that requires permitting and licensing, you may be happy with your results. Doing it yourself does have its risks such as not ending up with the quality you could have by using a professional. On the other hand, if you have some skills, you might do a better job than a mediocre contractor who isn’t as invested in your home as you are.

9. Vet Your Craftsman

Hiring someone who does a poor job or damages your home is a common risk of home renovation projects. Shopping for carpenters, painters, plumbers, and others solely on the basis of price can very easily lead to problems, which can require more time and investment on your part to correct. Choosing a contractor that’s skilled and reliable requires taking the time to look at portfolios, ask questions, and seek recommendations and reviews.

10. Collect a few Bids

It can take more time, but getting bids from several different companies is a smart way to help keep your renovation costs low. Not only does this type of “shopping” give you options for how much you can pay for specific tasks, but it can also give you an idea of how different contractors would approach your project.

11. Shop Wisely

It can be easy to order items online or pick up everything from your local home remodeling store, but high shipping costs and limited in-store options can actually increase your expenditures. If you’re looking to minimize costs, settling for what’s most convenient isn’t likely to help you. Instead, taking the time to shop around thoroughly and think creatively about your renovation plans can help save you a bundle.

12. Price Match

If you find an appliance online that you really love, you may want to try bringing a copy of that ad to your local retailer, and asking them to match the deal. This way you not only save yourself shipping costs, but you also get the best price for the item you prefer.

13. Try Repurposing

Before you spend money replacing what you have, consider transforming your items instead. Perhaps you could refinish or paint your kitchen cabinets instead of replacing them. Changing the hardware and interior panels are also simpler options that can reflect your style. Sometimes small changes can result in big transformations.

14. Consider Salvaged Materials

You can sometimes save big using salvaged materials. Secondhand shops like Habitat ReStores can sell old kitchen cabinets, flooring, light fixtures, plumbing fixtures, and furnishings for a fraction of the original sale price. You can even find unused paint, hardware, and art. For additional options, online sites like Craigslist and Facebook Marketplace can provide useful, previously used items as well.

15. Be Creative Side

Pinterest can be a great source of budget friendly renovation ideas. You can spend a few hundred dollars on a mason jar light fixture; or you could make your own. How about creating a room divider with used pallets? Necessity is often the mother of invention, and you may discover a creative side you didn’t know you had by looking for creative design solutions.

The Takeaway

Inflation and supply chain problems can make home renovations and remodeling on a budget much more challenging, but not impossible. If you choose the best projects for added value; plan and shop for materials and craftspeople with care; and are willing to be creative and flexible, you can wind up investing less money, time and worry.

If your home renovation budget is a tad bit short of your dream, a home improvement loan from SoFi could give you the extra boost you need. With no collateral, no fees and the opportunity for same-day funding, SoFi can help get your project up and running in no time.

Explore how a home improvement loan can kick off your home renovation.

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Photo credit: iStock/LightFieldStudios

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Maybe you’ve just bought a house, or maybe you’ve had your house for decades and love everything about it — except for the extremely outdated kitchen, built before the days of marble top counters, stainless steel appliances, and kitchen islands. Renovating your kitchen can get expensive fast, but with inflation, materials cost even more than usual, so it can be tougher to control expenses. Luckily, there are a few strategies you can use to get the updates you crave, without emptying your pockets.

How to Keep Inflation From Ruining Your Kitchen Renovation

1. Setting A Budget

Like most people, you probably already have a budget in mind. That’s a good start, but even with a spending limit in place, it’s smart to use a tool like this home renovation cost calculator to get an estimate of what your kitchen reno will ultimately cost, and make sure your budget will truly cover it. These calculators allow you to choose from basic to extremely bespoke changes, and they consider the cost of labor and raw material, generally with a 20% margin for the contractors. (And contractors can cost much more than you may expect!)

2. Being Flexible

Be flexible about your upgrades. It’s not uncommon to have to cut back on some of your plans due to price hikes, sold out materials or surprise developments during construction. Expect to make compromises. If your dream project begins to get pricey, consider focusing on just one or two aspects of your reno that are most important to you, and saving other changes for another time.

3. Getting Creative

To keep your costs down, try thinking outside the box. Say the countertop you really want is way out of your budget. Perhaps your contractor may know where to find salvaged materials at a deep discount. Or the cabinets you had your eye on have jumped in price. Opting to reface instead of replace your existing cabinetry could be a reasonable, cost-effective approach. Being open to these kinds of options can really help keep your spending in check.

4. Doing It Yourself

DIY can be a great way to keep inflation from ruining your kitchen budget … if you know what you’re doing. There are millions of how-to videos online with detailed instructions on everything from putting in new flooring to installing sinks. One of the largest costs of any renovation is labor, and you can reap some significant savings by doing some of the things yourself, and saving the really hard stuff for a contractor. Keep in mind, though, that taking on tasks outside of your abilities could end up costing you in the end, so be realistic about what projects you can handle and which are better left to the professionals.

💡 Recommended: How Much Does it Cost to Remodel a House?

5. Considering Temporary Fixes

Can you update your cabinets and countertops with removable materials? Or perhaps a new coat of paint and some new pulls? Peel and stick wallpaper has become particularly popular due to its variety and flexibility. It comes in countless prints from wood grain to marble, and can be used as a backsplash, on countertops, kitchen cabinets, and yes, walls. Incorporating one of these simple changes can give your kitchen a fast and financially friendly refresh.

6. Renovating vs Remodeling

Yes, there’s a difference, and the distinction is important. If you are remodeling, you are changing the physical space, breaking down walls, removing cabinetry, etc. Remodels are almost always more labor intensive, require more materials, possibly permits, and definitely more of your contractor’s time, so they are almost always more expensive, even without inflation. Renovating, however, means you are updating what already exists. In this scenario, it’s often easier to pick your battles — keep the cabinets but change the countertop, for instance. So, if you really want to keep costs down, you may want to consider renovating cosmetic features instead of remodeling.

7. Consider a Loan

If you can’t wait to renovate but don’t have all the cash you need, you could consider getting a personal loan to cover the costs. If you’ve made enough mortgage payments, tapping into your home equity could be another option for funding your project. There are both benefits and drawbacks to borrowing so be sure to read the fine print, keep a close eye on interest rates and do your best to keep your project on track and under budget.

8. Increase Your ROI

Tapping into a mortgage refi or getting a personal loan might seem risky, but it can make sense if you’ve considered how much your home improvement may boost the value of your home when it comes time to sell it. Using a home improvement ROI calculator can help you estimate how much value you can add to your home after a renovation or remodel.

Another metric you may want to consider is the return on investment, for a particular project. Boosting your curb appeal — that is, the exterior of the house — can give you the most bang for your buck. So can things like replacing a garage door, sprucing up the yard and landscaping, and even painting the exterior of the house. And even a minor kitchen renovation can boost your home’s value, potentially offsetting any inflation costs you may incur.

9. Choosing The Right Contractor

Once you’ve decided what you want to do and what you can afford, it’s time to find a good contractor to execute your vision. This one decision can make or break the entire project, so it’s wise to ask for personal referrals. If that’s not an option, you can always search the top-reviewed contractors in your area. And just like comparing prices at the grocery store, getting estimates from at least three contractors can help you save.

The Takeaway

Inflation might be sky high right now, but it doesn’t have to stop you from having the kitchen of your dreams. Whether you are going for a full remodel or a few cosmetic changes, there are ways to update the look of your kitchen without breaking the bank.

And should you decide to pick up a personal loan to cover those costs, be sure to budget a little extra for the “just-in-case.” SoFi’s home improvement loans range from $5K to $100K and can cover just about any kitchen project. Plus, with no collateral and same day funding, you can kick off your project sooner and can find yourself cooking in your new kitchen in no time.

Learn how a SoFi home improvement loan may help you fund your remodel in no time.

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Photo credit: iStock/sturti

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Technically, there is no limit to how many personal loans you can have at once. Lenders may approve a second or third loan if the borrower has paid off part of the first loan and has a history of on-time repayment.

In fact, it’s fairly common for one loan to fall short of covering all of a borrower’s needs. Let’s say you’re remodeling your primary bathroom. You take out a $5,000 personal loan to cover the costs. But then you discover major plumbing issues that will cost thousands more to fix, making your $5,000 budget woefully inadequate.

What is someone in this situation supposed to do? Even if you can have more than one personal loan, should you? We’ll investigate when it makes sense to take out additional loans, and what the potential risks are.

Can You Have Multiple Personal Loans at Once?

There is no law against having multiple personal loans, either from the same bank or different lenders. However, some lenders limit the number of concurrent loans they’ll extend to an individual. Other lenders have no such limit, but do cap the total amount one person can borrow.

Personal loan interest rates tend to be low compared to the alternatives. So carrying multiple loans at once can be a smart way to avoid the trap of revolving credit.

However, many lenders allow individuals to take out additional loans only if they have paid off part of the initial balance of the first loan — three to six payments, for instance.

Does It Ever Make Sense to Have Multiple Loans?

It’s never a good idea to take on debt unnecessarily, but there are a few situations where taking out an additional personal loan might be your best option.

Let’s say you take out a personal loan to consolidate credit card debt — one of the more common reasons for applying for a personal loan. After a year of making payments, you and your spouse decide to start a family. But you need fertility treatments, which aren’t covered by your insurance. The doctor requires payment upfront and doesn’t offer payment plans. A personal loan may be preferable to running up credit card debt.

Similarly, say you need money for emergency home repairs, veterinary bills, or automotive repairs. If ignoring an expense will cause more financial challenges and emotional stress than taking on more debt, a new loan is a viable option.

Ways Multiple Personal Loans Can Affect Your Credit

Any time you open a new loan, the repercussions ripple out to your credit report in a few different ways. First, opening a loan produces a hard inquiry on your credit report, and remains on it for two years.

Too many hard inquiries will affect your credit score, because the credit scoring models most commonly used will verify how recently and how often you’ve applied for credit. An uptick in both can, in turn, affect the interest rate available to you for a new loan.

Recommended: Can Personal Loans Hurt Your Credit?

Juggling multiple payments is another issue. An additional loan means another bill to pay every month. If you miss any payments — whether on your student loans, mortgage, credit cards, or personal loans — it can have consequences for your credit score. Payment history counts for a whopping 35% of your total FICO® Score. Beware of overborrowing when considering multiple loans.

Other Potential Complications

If you have multiple personal loans and are applying for a mortgage or other type of loan, your application could be denied because of your debt-to-income ratio (DTI). This ratio is calculated by adding up your monthly debt payments and dividing them by your monthly gross income.

Every lender will have different DTI requirements when considering someone for a loan, so check with your lender for specifics.

Getting Multiple Loans From the Same Lender

If you’re considering applying for a second loan from the same lender, you’ll first want to consider the following:

•   Ensure your current loan is in good standing. If you have missed or late payments, your lender can either decline your second loan application or charge you a higher interest rate.

•   Check whether your lender limits the number of outstanding personal loans, or caps the amount you can borrow.

•   Calculate your overall DTI, including any auto loans, mortgage, credit cards, and student loans. If the sum of all your monthly loan payments comes close to 50% of your income, another personal loan may not be in the cards. Many lenders recommend a DTI of no more than 36%.

If you believe you’ll meet the lender’s requirements for a second personal loan — and you feel comfortable making the additional monthly payment — getting an additional loan from the same lender could be the right strategy.

Recommended: Fixed vs. Variable Rate Loans

Qualifying for Another Personal Loan

Getting approved for a personal loan from another lender isn’t much different. While you won’t have to worry about a cap on the number of loans you have or the combined amount you can borrow, you will have to show that your DTI falls within recommended parameters.

The second lender will likely do a hard inquiry (or hard pull) on your credit report. They will see the payment history for your other personal loan, as well as other debt going back seven years. You can prepare by following the guidelines above in the first and third bullets.

Alternatives to Personal Loans

When you need to cover unexpected expenses, personal loans are a great resource — but not your only option. What’s right for you will depend on how much you want to borrow, and how long you’ll need to pay the money back. Here are some alternatives to personal loans you might consider.

•   Credit card. If your credit score is high, you can apply for a 0% APR credit card. The introductory rate is for a limited time — generally 12 to 18 months. If you can pay off the purchase by then, you’ll save a lot on interest.

•   Buy now, pay later (BNPL). Also known as a point-of-sale loan, BNPL gives you more time to pay off a large purchase — from several weeks to several years, sometimes at 0% interest. But terms and fees vary wildly, so make sure you understand what you’re signing up for.

•   401(k) loan. If you have funds in a 401(k) plan, you can borrow against them without any penalties — and the interest you’re charged goes back into your investment plan. This might make sense for short-term loans of 1 year or less.

•   Home equity loan. A home equity loan is a type of secured loan, meaning you offer your home as collateral in the event of default. These loans offer low fixed interest rates for those who qualify, as well as longer terms.

•   Payday loan. Also known as cash-advance loans, these are short-term, high-interest unsecured personal loans provided by small local merchants. Borrowers must show proof of income via a recent paycheck, but no credit check or collateral is required. The risks of payday loans are so great that many states have outlawed them.

The Takeaway

There is no law against having multiple personal loans. However, some lenders limit the number of concurrent loans they’ll extend to an individual, or cap the total amount one person can borrow. If you have two or more personal loans, having a solid repayment strategy helps prevent late payments and other potential problems. One of the simplest methods to avoid late payments is to set up automatic bill pay.

You may consider leveraging technology, such as SoFi Relay, to help keep track of your budget while you pay off these loans. If you’re looking to apply for a personal loan, consider seeing what options are available at SoFi. SoFi’s Personal Loans have absolutely no fees — no origination fees required, no prepayment fees, and no late fees.

Learn more about personal loans at SoFi.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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The main difference between a soft vs. hard credit check is that each hard check knocks a few points off your credit score, whereas soft checks don’t affect your score. Both hard and soft checks pull the same financial data but for different purposes. Hard checks are typically done when you apply for a loan or credit card; soft checks are conducted for most other purposes, such as pre-screening for credit card offers.

It’s important for consumers to understand this difference because too many hard checks — also known as hard pulls and hard inquiries — can significantly lower your credit score. This in turn can hurt your chances of getting the best offers on credit cards and loans. Keep reading to learn more about credit checks and how to prevent unnecessary hard checks of your credit file.

What Is a Soft Credit Inquiry?

As noted above, a soft credit check pulls most of your financial data:

•   The number and type of all your credit accounts

•   Credit card balances

•   Loan balances

•   Payment history for revolving credit (credit cards and home equity lines of credit)

•   Payment history for installment loans (auto loans, mortgages, student loans, and personal loans)

•   Accounts gone to collections

•   Tax liens and other public records

Soft inquiries are not used during loan or credit card applications. Instead, they’re used for most other purposes that require a background check, and do not require the consumer’s permission or involvement. Reasons for a soft check can include:

•   Employment pre-screening

•   Rental applications

•   Insurance evaluations

•   Pre-screening for financial offers by mail

•   Loan prequalification

•   Checking your own credit file

•   When you’re shopping personal loan interest rates or credit cards

Soft credit checks do not affect your credit score, no matter how often they take place. Some soft checks appear on your credit report, but not all — you may never find out they took place.

When they are listed, you might see language like “inquiries that do not affect your credit rating,” along with the name of the requester and the date of the inquiry. Only the consumer can see soft inquiries on their report; creditors cannot.

What Is a Hard Credit Inquiry?

A hard credit inquiry typically takes place when you apply for a credit card, mortgage, or car loan, and give permission for the lender or creditor to pull your credit file.

Each hard pull may lower your credit score — but only by less than five points, according to FICO® Score. All hard inquiries appear on your credit report. While they stay there for about two years, they stop affecting your credit score after 12 months.

Not all loans require a hard credit inquiry — but consider that a red flag. Some small local merchants offer short-term loans, high-interest unsecured personal loans. Borrowers must show proof of income via a recent paycheck, but no credit check is required. The risks of these “payday loans” are so great that many states have outlawed them.

Recommended: How to Get Approved for a Personal Loan

Avoiding Hard Credit Inquiries

Consumers should carefully consider if they really need new credit before applying for an account that requires a hard credit check.

For example, department stores and some chains like to entice you to apply for their store credit card by offering a generous discount on your purchase as you’re checking out. In that situation, ask yourself if it’s worth a credit score hit (albeit a small one).

Another way to minimize hard inquiries is to ask which type of credit check a company intends to run. If, for example, a cable company usually requires a hard credit inquiry to open an account, you might ask if a hard pull can be avoided. Other situations where there may be some flexibility include:

•   Rental applications

•   Leasing a car

•   New utility accounts

•   Requesting a higher credit limit on an existing account

•   Opening a money market account

Disputing Inaccurate Hard Inquiries

A good financial rule of thumb is to review your credit reports every year to check for common credit report errors and signs of identity theft. The Fair Credit Reporting Act guarantees consumers the right to access their credit reports each year for free. Go to AnnualCreditReport.com to order reports from Equifax, Experian, and TransUnion.

To check for inaccurate hard inquiries, look for a section on your credit report with any of these labels:

•   Credit inquiries

•   Hard inquiries

•   Regular inquiries

•   Requests viewed by others

You can dispute hard inquiries and remove them from your credit reports under certain circumstances: if you didn’t apply for a new credit account, you didn’t give permission for the inquiry, or the inquiry was added by mistake.

That said, under federal law, certain organizations with a “specific, legitimate purpose” can access your credit file without written permission. They include:

•   Government agencies, usually in the context of licensing or benefits applications

•   Collection agencies

•   Insurance companies, when certain restrictions are met

•   Entities that have a court order, as in child support hearings

Even so, if you didn’t give permission for a hard credit pull, it’s worth filing a dispute to request that the credit check be removed from your report.

Consumers may dispute hard inquiries online through AnnualCreditReport.com, or by writing to the individual credit reporting agencies.

Recommended: Fixed vs Variable Rate Interest Loans

Hard Credit Checks and Your Credit Scores

As mentioned earlier, hard inquiries appear on your credit report, and each hard pull may lower your credit score by five points or less. Here we’ll go into a bit more detail.

Why Hard Inquiries Matter

Multiple hard inquiries within a short time frame can do significant damage to your credit score. For instance, a 20-point hit from four or five hard inquiries could be enough to move you from the Good credit range down to the merely Fair. Someone in a Fair credit range can pay substantially more over a lifetime in interest and fees than someone with a Good score or higher.

How Many Points Will a Hard Inquiry Cost You?

As noted above, each hard pull will lower your credit score by less than five points. One or two hard inquiries per year may not matter, especially if you’re not planning on applying for a loan.

However, consumers should keep in mind that the impact on their credit score remains for 12 months. The real concern is when you’re shopping around for the best interest rate on a loan, and too many hard inquiries over a short period combine to pull down your score in a significant way.

How Long Do Inquiries Stay On Your Credit?

Hard inquiries stay on your credit report for two years. But their impact on your credit score lasts only 12 months.

Soft inquiries may remain on your credit report for one or two years, but only the consumer can see them.

The Takeaway

Soft credit inquiries do not affect a credit score, while hard credit inquiries usually cost you less than five points. In both cases, businesses pull information from your credit reports. Checking your own credit report counts as a soft pull, as do most other situations where the consumer hasn’t given written permission. Hard pulls are typically done only when you’re applying for a loan or new credit account.

If you’re thinking of opening a new credit card or raising your credit limit on an existing account, consider a personal loan instead. With a SoFi Personal Loan, you can borrow between $5,000 and $100,000 for home improvements, credit card consolidation, medical costs, and more. And you can check your rate in 60 seconds without affecting your credit score.

SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Personal
Loan for Good and Excellent Credit and Best Online Personal Loan overall.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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