Hard vs Soft Credit Inquiries: What are They and Why do They Matter?

There are many different factors that go into your credit score.

One large factor is your open credit card utilization rate, another is your percentage of payments that are made on-time, another is the length of your credit history and yet another is the number of derogatory marks on your credit reports.

And finally, there’s a small factor that represents your hard credit inquiries. Every time you apply for more credit, you take a small bite out of this slice. But what exactly is a hard inquiry, and how much of an effect does it really have on your credit?

Let’s start with the basics...

What is a Hard Inquiry?:

  • Hard inquiries (also known as “hard pulls”) generally occur when a financial institution, such as a lender or credit card issuer, checks your credit when making a lending decision. They commonly take place when you apply for a mortgage, loan or credit card, and you typically have to authorize them.
  • A hard inquiry could lower your scores by a few points, or it may have a negligible effect on your scores. In most cases, a single hard inquiry is unlikely to play a huge role in whether you’re approved for a new card or loan. And the damage to your credit scores usually decreases or disappears even before the inquiry drops off your credit reports for good.

How long will a hard inquiry stay on my credit reports?

  • Generally speaking, hard inquiries stay on your credit reports for about two years.
  • That doesn’t sound so bad, but you may want to think twice before applying for a handful of credit cards at the same time — or even within the span of a few months. Multiple hard inquiries in a short period could lead lenders and credit card issuers to consider you a higher-risk customer, as it suggests you may be short on cash or getting ready to rack up a lot of debt. So consider spreading out your applications for credit.

What is a Soft Inquiry?:

  • Soft inquiries (also known as “soft pulls”) typically occur when a person or company checks your credit as part of a background check. This may occur, for example, when a lender checks your credit to see if you pre-qualify for financing. Your employer might also run a soft inquiry before hiring you.
  • Unlike hard inquiries, soft inquiries won’t affect your credit scores. (They may or may not be recorded in your credit reports, depending on the credit bureau.) Since soft inquiries aren’t connected to a specific application for new credit, they’re only visible to you when you view your credit reports.

Some Examples of Hard and Soft Credit Inquiries:

  • Hard Inquiries:
    • Mortgage Applications
    • Auto Loan Applications
    • Credit Card Applications
    • Student Loan Applications
    • Personal Loan Applications
    • Apartment Rental Applications
  • Soft Inquiries:
    • Checking your credit scores for free online
    • “Pre-qualified” credit card or loan offers
    • “Pre-qualified” insurance quotes
    • Employment verification (i.e. background check)

Keep in mind, there are other types of credit checks that could show up as either a hard or soft inquiry. For example, cable, utilities, internet and cellphone providers will often check your credit.

If you’re unsure how a particular inquiry will be classified, ask the company, credit card issuer or financial institution involved to distinguish whether it’s a hard or soft credit inquiry.

How to Dispute Hard Credit Inquiries:

We recommend checking your credit reports often. If you spot any errors, such as a hard inquiry that occurred without your permission, consider disputing it with the credit bureau. You may also contact the Consumer Financial Protection Bureau (CFPB) for further assistance.

Keep in mind, you can only dispute hard inquiries that occur without your permission. If you’ve authorized a hard inquiry, it generally takes two years to fall off your credit reports.

How to Minimize the Impact of Hard Credit Inquiries:

When comparing making a large purchase, don’t let a fear of racking up multiple hard inquiries stop you from shopping around for the lowest interest rates.

FICO gives you a 30-day grace period before certain loan inquiries are reflected in your FICO® credit scores. And FICO may record multiple inquiries for the same type of loan as a single inquiry as long as they’re made within a certain window. For FICO scores calculated from older versions of the scoring formula, this window is 14 days; for FICO scores calculated from the newest versions of the scoring formula, it’s 45 days.

Similarly, the VantageScore model gives you a rolling two-week window to shop for the best interest rates for certain loans. “That way, they only impact your credit score once,” the company says.

Bottom Line:

Your credit scores play a major role in your financial well-being. Before applying for credit, take time to build your credit scores. With stronger credit, you may improve your chances of being approved for the financial products you want at the best possible terms and rates.

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