Anyone looking to buy a home, get a car loan, or otherwise apply for financing is always encouraged to check their credit report. This indicator of how much debt you carry, and how well you've been doing in keeping up with payments, is also summed up in a credit score.

Naturally, lenders will be more reticent about providing a mortgage to someone who has not done a good job of managing their debts. Even if you have a decent credit score, improving it can help you secure the most advantageous terms for a loan.

Inquiries into your credit can result in a temporary decrease in your credit score. However, soft pulls—also known as soft checks or soft inquiries—allow your credit to be reviewed without a negative effect.

While "hard pulls" on your credit report can reduce your score, soft pulls will simply provide some information about your credit without negatively impacting it. One example of a soft pull is reviewing your own credit report to see if there are any errors that need correcting or other steps you should take to improve your finances.

You might be surprised to check your credit and see that several companies have also conducted soft pulls. The credit bureau Experian says relevant agencies such as lenders, insurance companies, and credit card companies can do soft pulls on your credit without your permission. This allows them to preapprove you for offers.

Adam McCann, writing for the financial site WalletHub, says employers may also do a soft pull on your credit to get a general sense of your financial management. This screening is often required for jobs where a security clearance is required or you will be working with money.

Creditors may do a soft pull as part of the routine maintenance of an account, such as setting spending limits on a credit card. Apartment building managers and utility companies may also be able to check your credit to see if you can reliably handle monthly expenses.

While these checks will be visible to you, they won't necessarily be visible to other companies that review your credit. However, Experian says insurance companies may be able to see if another insurer has conducted a soft pull.

Even if several places do soft pulls on your credit, the action won't have a negative effect on your credit score. The credit bureau TransUnion says soft pulls will stay on your report for 24 months.

Hard pulls are conducted when you apply for a loan, since the lending agency will give your credit report more scrutiny. Trent Hamm, writing for the budgeting site The Simple Dollar, says such inquiries will have a short-term negative effect on your credit score. Lindsay Konsko, writing for the financial site NerdWallet, says a hard pull can knock up to five points off your credit score. Unlike soft pulls, hard pulls are visible to anyone who checks your credit, and a lender or other agency needs your permission to conduct one.

Hard pulls generally occur when you apply for a mortgage, auto loan, student loan, personal or business loan, or credit card. Some banks have also started doing hard pulls before approving a customer for a checking or savings account.

The temporary negative effect of a hard pull is due to the concern that if a person is applying for more credit, they may be having trouble with their current financial situation. Experian says there is also the risk that you will overextend your finances if you take on too much debt or open up too many lines of credit.

Like soft pulls, hard pulls will remain on your report for two years. However, TransUnion says a hard pull will only affect for score for about 12 months after it is conducted.

Since a higher number of hard pulls is associated with greater financial risk, it is a good idea to limit the number of hard pulls you allow. However, it is still possible to allow multiple lenders to conduct hard pulls while shopping for an auto or home loan. If several inquiries take place in a short period of time, usually 45 days, credit bureaus will consider that they are related to comparison shopping for a single loan.

Periodically checking your credit report will let you see if there are any unexpected hard pulls. Experian says these can sometimes be a sign of fraud, such as another person trying to get credit in your name, and you can ask the inquiry to be removed from your credit history. McCann says it is possible to pull your credit report from each of the three major credit bureaus once a year, and that checking the report from a different bureau every four months will help keep you up to date on your credit.

It is sometimes unclear whether a check on your credit score will be a hard pull or a soft pull. Konsko says organizations such as cable TV providers or car rental companies may conduct either type of check. If a company asks to review your credit, make sure you know whether the action could potentially bring down your credit score.