Opening a CD Account - Hard Pull Vs Soft Pull Explained
If you think that investing in a certificate of deposit or CD merely entails visiting a bank, filling out the necessary forms, writing out a check or depositing the cash, and you're good to go, you have another thing coming. This scenario may have been true perhaps twenty years back but this time around, money is not the only consideration that banks have when accepting your deposit.
Bank requirements for a CD account
For most banks, you start with the basic requirements. These requirements may vary by institution but typically, banks will ask for any two or three of the following:
- Completed application form or signature card. Your basic personal information will be required here including name, address, phone numbers, mother's maiden name and others.
- Social Security Number
- Driver's License
- Other forms of identification
- A checking account maintained in the same bank
Hard Pull vs Soft Pull
Now here's where it gets a bit tricky. Many consumers may not be aware of this fact but when opening a CD account or any deposit account for that matter, banks will do a credit inquiry on you. These are commonly known as "hard pulls" or "soft pulls" and serve as a notation on your credit history. How do the two inquiries differ and how will this affect you?
A hard pull or a hard credit inquiry takes place when a person or company requests for your credit score and history, traditionally, to aid in a credit decision such as when one is requesting for a car loan, mortgage, or any other credit application. The three credit bureaus refer to it by different terms and this how a hard pull appears on your credit report:
- TransUnion – Regular inquiries
- Experian – Requests viewed by others
- Equifax – Inquiries in the last 12 months
A soft pull, on the other hand, is a credit inquiry that does not fall under any of the categories listed above. For instance, when you do your own check of your credit history or when potential employers want to confirm your identity, this will be reflected on your report as a soft pull and would not affect your credit score.
Why should a hard pull affect you? The reason is simple. Too many hard pulls appearing on your report may have a lending institution regard you as a credit risk and lower your chances for loan approval. Further, this can also lower your credit score and in turn, result in higher loan or insurance rates for you.
New CD Accounts and Hard Pulls
Although not all banks practice this policy at this time, it's best to prepare yourself with a hard pull every time you open a new CD account. The same can also hold true when opening a savings or money market account, and a checking account with overdraft protection. So as not to get caught by unexpected surprises, ask your bank before handing over that application form. The bottom line is, hard credit checks are no longer limited to credit transactions.
Hard Pulls or Soft Pulls at the Biggest U.S. Banks
|Bank||Type of Credit Inquiry for Deposit Accounts|
|Bank of America||Soft pull|
|Wells Fargo||Soft pull|
|Capital One||Soft pull|
|U.S. Bank||Soft pull|
|TD Bank||Soft pull|
|Charles Schwab||Hard pull|
|Citizens Bank||Soft pull|
|Fifth Third Bank||Soft pull|
|Regions Bank||Soft pull|
|M&T Bank||Soft pull|
|BMO Harris||Soft pull|
|Ally Bank||Soft pull|
This knowledge, however, should not deter you from continuing to save. In fact, if you have no plans of getting a loan in the near future then this shouldn't be an issue to you as these inquiries will only show on your credit report for about 2 years or even less.
It's also best to keep in mind that a couple of inquiries for opening a new account would not impact as much on your credit history as a string of credit card late payments would. So as long as you have always managed your credit diligently, there's no reason for you not to open a CD account.