Hard Inquiry vs. Soft Inquiry – How Each Impacts Your Credit Score

You may not know that there are two types of credit inquiries - soft inquiries and hard inquiries. Soft credit inquires, also often referred to as soft credit pulls and they don't affect your credit. Soft credit inquires are created when a company inquires on your credit to determine if credit could be extended. Hard credit inquiries are generated when you attempt to open a new line of credit. Hard credit inquiries, also referred to as hard credit pulls, are reported to the three national credit bureaus and could lower your credit score. Your permission is required for a hard credit inquiry

So how does each type of credit inquiry impact your credit score?

Well, let us look at both hard inquiries and soft inquiries, their differences, and how they impact your credit score.

Hard Credit Inquiry vs. Soft Credit Inquiry

What is a soft inquiry?

A soft credit inquiry is a review of a person's credit report as a means to review that person's credit worthiness or screen that person for pre-approval offers. A soft inquiry is also run when you check your own credit report or when a landlord or a potential employer reviews your credit. Lenders will make a soft inquiry on your credit to determine if you fit their credit profile.

Credit card and lending companies may occasionally run soft credit checks to determine if you pre-qualify for one of their promotions. A soft inquiry is pretty common, and you may have a soft inquiry done multiple times a year by various lenders. You can see them on your credit report, but they have no impact on your credit score. Also, a soft inquiry on your credit report can be performed without your permission.

Examples of soft inquiries

Example 1: Let's say you are getting quotes for automobile insurance. Each company you get a quote from will do a soft credit inquiry to partially determine the insurance rate.

Example 2: Credit card companies will run a soft inquiry to determine if you are eligible for one of their credit card pre-approval promotions.

Example 3: You run your own credit report check on a site like CreditKarma.com to see your current score.

Example 4: You are applying for a job and a potential employer runs a background and credit check.

How does a soft inquiry impact your credit score?

Soft inquiries are quite common and have no impact on your credit report. Therefore, you should not worry when checking your own credit report or having an employer, lender, or landlord run a check on your credit report.

What is a hard inquiry?

A hard inquiry is when a lender reviews your credit report after you apply for any type of loan -- from a home loan to an auto loan or a credit card -- to aid the lender in the decision-making process. This type of inquiry is used to decide your credit worthiness. A hard inquiry may require your permission, but not necessarily in every instance, such as when applying for credit or insurance.

Examples of a hard inquiry

Example 1: You are applying for a home loan. During the application process, the home lender will run a hard inquiry on your credit report to determine your creditworthiness.

Example 2: You go to a car dealership to buy an SUV. After agreeing on the price, the finance department will run a hard inquiry credit check to see if you are eligible for an auto loan and at what interest rate.

Example 3: You apply for a credit card and the credit card lender asks your permission to run a hard inquiry on your credit report. They do this to determine the risk you pose for repayment. A hard credit inquiry does not ensure or guarantee to the lender that you will pay the money back but demonstrates your previous payment history and the likelihood you will repay the loan. Higher credit scores correlate with lower risk.

How does a hard inquiry impact your credit score?

Since a hard inquiry is run for major loans such as home loans and auto loans, they will appear on your credit report. However, one hard inquiry every year generally will not negatively impact your credit score long term

If you have multiple hard inquiries for varying credit requests, you could see your credit score be negatively impacted. However, multiple hard inquiries within a certain time period for a home or auto loan are generally counted as one inquiry. The period may vary depending on the credit scoring model used, but it's typically from 14 to 45 days. You should be careful about how many times you apply for loans and credit cards.

Comparing hard inquiry vs. a soft inquiry

Now that we explained both types of credit inquiries, let us take a look at both of them, side-by-side:

Hard Inquiry

Soft inquiry 

For major loans such as a home or an automobile or a credit card application.

Checking your own credit report, background check, and pre-qualification or credit card or loan offers.

Performed by a lender 

Can be performed by you, a credit card company checking to see if you qualify for a promotion, an employer, a landlord, or anyone conducting a background check.

Appears on your credit report. Inquires made during a home or auto purchase are generally counted as one inquiry. The reporting period may vary depending on the credit scoring model, but it's typically 14 to 45 days.

Has no impact on your credit score and does not appear on your credit report.

May require your permission in some instances.

Does not require your permission

Checking your credit report

You can check the number of hard inquiries on your credit report using a site like AnnualCreditReport.com. They will allow you free access to your credit report from the three national credit reporting agencies once per year.

If you feel that there is a hard inquiry on your report - that should not be there - you can challenge the inquiry. At that point, the credit reporting agency will seek verification of the hard inquiry.

Using credit inquiries while maintaining a top credit score

It is important to know when to have both hard and soft inquiries performed on your credit report. While you can use a soft inquiry anytime you want, you should only consider the impact a hard inquiry may have on your credit score before you apply for credit. By controlling the inquiries on your credit report, you can help maintain a healthy credit score.

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