When you check your credit report or apply for a loan, you’ll often hear terms like “hard inquiry” and “soft inquiry.” While they may sound similar, these inquiries have very different effects on your credit score. Understanding the difference is key to managing your credit profile and maintaining a healthy credit score. In this blog, we’ll break down what each type of inquiry means, how they work, and why they matter.
What is a Credit Inquiry?
Credit inquiries happen whenever someone checks your credit report. It could be you, a lender, or even a potential employer. Each time someone looks at your credit, it’s recorded on your credit report as an inquiry.
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There are two types of credit inquiries:
- Hard Inquiry (also called a “hard pull”)
- Soft Inquiry (also called a “soft pull”)
What is a Hard Inquiry?
A hard inquiry happens when a lender checks your credit report to make a lending decision. This usually happens when you apply for credit, like a loan or a credit card.
Here’s a quick look at how hard inquiries work:
| Hard Inquiry Details | Explanation |
|---|---|
| Triggered By | Applying for credit, like a mortgage or credit card. |
| Impacts Credit Score | Yes, it can lower your score slightly. |
| Visible to Others | Yes, other lenders can see hard inquiries. |
| Stays on Credit Report | Up to 2 years, but impact fades over time. |
Effects on Your Credit Score
A hard inquiry can lower your credit score by a few points. This is because it indicates that you’re looking to take on new debt, which can make you appear riskier to lenders. However, the impact is generally small and temporary. Over time, the effect fades, usually after a few months.
What is a Soft Inquiry?
A soft inquiry is a credit check that does not affect your credit score. These inquiries are usually for informational purposes and are often initiated by companies or individuals not directly related to lending.
| Soft Inquiry Details | Explanation |
|---|---|
| Triggered By | Checking your own credit, pre-approval offers, employer checks. |
| Impacts Credit Score | No, it has no effect on your score. |
| Visible to Others | No, only you can see soft inquiries on your report. |
| Stays on Credit Report | Yes, but they are not visible to lenders. |
Common Examples of Soft Inquiries
Checking your own credit: Monitoring your credit report for accuracy.
Background checks by employers: Employers may check your credit during hiring.
Pre-approval offers: Banks often do a soft pull to see if you qualify for pre-approved offers.
Key Differences Between Hard and Soft Inquiries
Here’s a quick comparison of hard and soft inquiries to help you understand how each affects your credit:
| Feature | Hard Inquiry | Soft Inquiry |
|---|---|---|
| Purpose | Credit application | Informational purposes |
| Affects Credit Score | Yes | No |
| Visible to Lenders | Yes | No |
| Impact Duration | Up to 2 years | Not applicable |
When Are Hard and Soft Inquiries Used?
Understanding when hard and soft inquiries are used can help you make better financial decisions.
Hard Inquiries:
- Loan applications: When you apply for a mortgage, car loan, or personal loan.
- Credit cards: Applying for a new credit card leads to a hard inquiry.
- Credit line increase: Some banks perform a hard pull if you request an increase in your credit line.
Soft Inquiries:
- Checking your own credit report: You can check your credit report without impacting your score.
- Pre-qualification: Creditors perform a soft pull to see if you’re eligible for pre-approved offers.
- Employer checks: Employers often check credit as part of the hiring process.
How to Minimize Hard Inquiries on Your Credit Report
Hard inquiries can impact your score, so it’s smart to limit them. Here are some tips to avoid unnecessary hard inquiries:
Limit new credit applications: Only apply for credit when necessary.
Use pre-qualification tools: Many lenders offer pre-qualification checks, which are soft inquiries and won’t affect your score.
Space out applications: Multiple hard inquiries in a short time can signal risk to lenders. Space out your applications to avoid this.
Impact of Hard and Soft Inquiries on Credit Score
While soft inquiries have no impact, hard inquiries can affect your score. Typically, a single hard inquiry lowers your score by 5-10 points. However, multiple hard inquiries, especially within a short time, can have a cumulative impact.
Here’s how FICO scores handle hard inquiries:
- Minimal Impact: For people with good credit history, a single hard inquiry may only affect the score by a few points.
- Temporary Drop: The impact fades within a few months, and hard inquiries generally disappear from your report after two years.
FAQs: What’s the difference between a Hard Inquiry and a Soft Inquiry
Does checking my credit score affect my score?
No, checking your own credit score is a soft inquiry and does not affect your score.
How long does a hard inquiry stay on my credit report?
A hard inquiry stays on your credit report for up to two years.
Can I remove a hard inquiry from my credit report?
Only if it was unauthorized or a mistake. Legitimate hard inquiries cannot be removed.
Final Thoughts
Knowing the difference between hard and soft inquiries is essential for managing your credit score. Hard inquiries should be limited because they impact your score. Soft inquiries, on the other hand, are harmless and don’t affect your score at all. If you’re planning a big purchase like a home or car, try to space out your credit applications. This can help prevent a negative impact on your credit score.
Disclaimer: This article is for informational purposes only. It is not financial advice. Always consult a financial professional for specific advice regarding your credit and financial health.
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