Hard Vs. Soft Inquiries: What You Need to Know

Credit Reports
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3
 Min read
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May 6, 2022

Your credit score is used to evaluate the risk of doing business with you. There are several things that can affect your score. Credit inquiries can have a small impact on your credit score, and even though the impact is slight, it could cause you to land in a different credit score range, and that can cost you money in interest rate charges on a loan or mortgage. There are two different types of credit inquiries. Let’s look at hard vs. soft inquiries: what you need to know.

What is a Hard Inquiry?

When you apply for new credit such as a credit card, mortgage, or personal loan, or when you apply to rent an apartment, the potential lender or landlord usually requires authorization to pull your credit report. The information on your credit report is used for the purpose of making a lending decision, and this type of inquiry is known as a hard inquiry. Written consent is required for a hard inquiry to be done.

Since you’re in the process of trying to get new credit, this inquiry is shown on your credit report. It lets other lenders know you’ve recently applied for credit, and it gives them an idea if you’re applying for credit too often. A hard inquiry stays on your credit report for two years but only affects your credit for a year.

What is a Soft Inquiry?

A soft inquiry is more like a background check, and it may be pulled without your knowledge. Credit card companies may do a soft inquiry to get an idea of whether prospects would likely qualify for one of their cards. A soft inquiry may also be done to prequalify you for a loan or as part of an account review by current creditors.

Potential employers may do a soft inquiry as part of a background check. Since it’s not for the purpose of extending credit, this type of inquiry doesn’t show on your credit report. 

Credit Inquiries and Your Credit Score

A single hard inquiry isn’t likely to affect your credit score much, but if too many hard inquiries appear on your credit report in a short amount of time, it can raise red flags. It’s a good idea to space out applications for credit. There’s some leeway if you’re shopping around for the same type of loan product, such as a car loan or a mortgage, within a two-week timeframe. Checking your own credit is a soft inquiry and doesn’t affect your credit.

Credit Report Errors

If a hard inquiry appears on your credit report without your authorization, you have the right to dispute it. This is one of the things you should review at least annually on your credit reports, along with account balances, payment history, and account statuses.

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