What’s The Difference Between a Soft and Hard Credit Inquiry?

Posted by Sha'Kreshia Terrell in CreditOctober 25, 2022(Last Updated October 25, 2022)4 min read
Key Takeaways
  • A credit inquiry is the same as a credit check. Inquiries occur when a company or individual makes a legally permissible request to view your credit report.
  • Soft inquiries do not affect your credit score and can be conducted with or without your permission.
  • A hard inquiry or “hard pull” happens when lenders perform a credit check when you apply for a new credit card, loan, or mortgage.
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What is a Credit Inquiry?

 

A credit inquiry is the same as a credit check. Inquiries occur when a company or individual makes a legally permissible request to view your credit report

 

Whether applying for a mortgage, loan, or credit card, lenders want to know how much of a financial risk you are. By pulling your credit report, lenders can determine your amount of financial responsibility. For example, when lenders pull your credit report, they assess the chance you will default on the loan or miss any payments.

 

Your FICO score is an important factor in your financial health, and it’s created by using various data on your credit report. Credit inquiries make up 10% of your credit score. The two types of credit inquiries are soft inquiry and hard inquiry. 

 

What is a Soft Inquiry?

 

Soft inquiries do not affect your credit score. Sometimes referred to as “soft pulls,” these can be conducted with or without your consent. For example, if you have ever received a random preapproved credit card offer in the mail, you were a product of a soft pull. Likewise, if an employer informed you that they had to do a credit check to determine if you would be an eligible employee, your credit profile has experienced a soft pull.

 

When renting an apartment, your landlord may require a credit check to determine whether you are a financially responsible and trustworthy tenant. If a landlord or property owner decides to pull your credit, they look for good credit history and on-time payments. Depending on the landlord, they may want to do a hard or soft credit check. 

 

 

Other common reasons for a soft inquiry appearing on your credit report would be insurance quotes, credit limit increase eligibility, new preapproval offers, and personal credit checks.

 

What is a Hard Inquiry?

 

Lenders must perform a credit check in many situations, like when you apply for a new credit card, sign up for a new cell phone contract, or apply for a mortgage loan. This is known as a hard inquiry or “hard pull.” A lender will pull your credit to determine whether to approve or deny you for financing. 

 

Hard inquiries will affect your credit score, and too many of them will cause you to get denied by creditors. In addition, hard inquiries require your permission before your credit is pulled. So you shouldn’t be surprised when they appear on your credit report.

 

Recommended Read: 3 Tips to Build and Improve Your Credit Score 

 

What’s The Difference Between a Hard and Soft Inquiry?

 

Hard inquiries stay on your credit for up to two years, affecting your credit score. A hard inquiry is also listed on your credit score for you and lenders to view. However, soft inquiries typically could drop from your credit report after one year. When listed on your credit report, soft inquiries are generally only viewed by you.

 

 

According to Experian, the effects of a hard inquiry are minimal. However, it often damages your credit score within the first few months as long as no negative items are added. 

 

How to Manage Multiple Credit Inquiries

 

Plan out your finances before making a big financial commitment. By doing some financial planning beforehand, you can avoid numerous inquiries on your credit report. You could hurt your credit score if you have multiple soft and hard inquiries on your credit report within a short time span. 

 

Applying for Multiple Loans

 

Avoid applying for several new loans or credit cards at once because hard inquiries can lower your credit score, regardless of whether you are approved or denied.

It is also a good idea to postpone loan or credit applications for six months to a year before applying for a mortgage or vehicle loan.

 

Recommended Read: Why Your Credit Score Matters When Purchasing a Home

 

Disputing Inquiries

 

Check your credit reports from all three credit bureaus (Equifax, Experian, and TransUnion) at least once a year. You can check your credit report for free by going to AnnualCreditReport.com. You can also obtain a free copy of your Experian credit report at any time.

 

Start the dispute process immediately if you see anything suspicious on your credit report that you do not recognize. While unexplained hard inquiries are uncommon, they can lower your credit score and, more importantly, indicate fraudulent activity.

 

Any fraudulent activity should be reported to law enforcement and followed up by a security freeze placed on your credit report. A security freeze disallows creditors access to your credit report and prevents others from opening accounts in your name. The last phase would be to dispute and have it removed from your credit history.

 

Recommended Read: What is a Credit Card Dispute and How Do They Work?

 

The Money Wrap-Up

 

Both soft and hard inquiries are part of the foundation of the credit reporting system. By conducting credit checks, lenders can monitor your ability to handle debt and assess your capability for taking on additional loans and lines of credit.

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