Hard credit inquiry vs. soft credit inquiry: What they are and why they matter
Lenders use soft credit checks or hard credit checks to determine your creditworthiness.
A hard credit inquiry is when a lender checks your credit before approving a loan, such as a mortgage or a car loan, or a credit card you have applied for. Soft inquiries occur when you receive an offer from a lender, such as a pre-approved credit card, or when you check your credit.
But do you know why there is hard questioning instead of soft questioning? What about the differences between the two? What do you think about whether there is going to be hardening or a softening before an inquiry is made, or whether any of these have implications? Learn the similarities and differences between hard and soft credit checks and more.
What is a Credit Inquiry?
The term credit inquiry describes what happens when someone requests and receives your credit information. One step in the process involves some parties sending a request for information, or an “inquiry,” to one of the three credit bureaus. Next, the credit bureau can share your credit report if the applicant person or company has the legal right to ask for it. There are exceptions if you have frozen credit on your data.
Federal law gives you the right to know who has access to your credit information. The credit reporting agency must record every credit inquiry (aka credit check or credit bridge) in your credit file. Most credit inquiries stay on your credit report for two years as a matter of policy.
Hard Credit Inquiry:
Hard inquiries (also called “hard pulls” or “hard credit checks”) usually occur when a financial institution, such as a lender or credit card issuer, decides to lend you credit. These usually take place when you apply for a mortgage, loan, or credit card, and you usually have to permit them.
A hard inquiry can lower your score by a few points, or it can have a negligible effect on your score. In most cases, a rigorous inquiry is unlikely to play a major role in whether you have been approved for a new card or loan. And the damage to your credit score usually subsides or disappears before the inquiry leaves your credit reports thoroughly (strict credit checks are usually about two on your credit reports). Live for years).
It doesn’t sound bad, but you can think twice before you apply for a handful of credit cards at once or within a few months. Numerous difficult inquiries in the short term can force lenders and credit card issuers to consider you a high-risk consumer, as it may indicate that you are short of cash or that you are borrowing too much. So consider expanding your credit card applications.
The following types of credit checks are examples of rigorous inquiries.
- Loan applications (mortgage, auto, student, personal, etc.)
- Credit card applications
- Requests for the increase in credit limit
- Applications for credit lines
- New utility applications
- Apartment Rental Applications
- The collecting agency waives tracing
How many tough inquiries are there?
The impact of a rigorous inquiry on your credit score ultimately depends on your overall credit health. In general, adding one or two difficult queries to your credit reports can lower your scores by a few points, but this is unlikely to have much effect.
Doing more hard inquiries in a short period of time will have a huge impact on your scores. This is because lenders and, in fact, credit scoring models, view multiple credit applications as a sign of risk in the short term. However, there may be exceptions when you are purchasing certain types of loans, such as car loans, student loans, or mortgages.
Soft Credit Inquiry:
Soft inquiries (also called “soft pulse” or “soft credit checks”) usually occur when a person or company checks your credit as part of a background check. This can happen, for example, when a credit card issuer checks your credit without your permission to see if you are eligible for certain credit card offers. Your employer may also make a soft inquiry before hiring you.
Unlike hard inquiry, a soft inquiry will not affect your credit scores. (Depending on the credit bureau, they may or may not be recorded in your credit reports.) Since soft inquiries are not linked to a specific application for new credit, they are only visible to you when you view your credit reports.
The following types of credit checks are examples of soft inquiries.
- Personal credit checks
- Pre-approved credit offers
- Insurance Applications
- Current Lender Account Review
- Job applications
Will checking my credit scores be a hard inquiry?
No, it is reported as a soft credit check, so it will not lower your score. You can check your VantageScore 3.0 credit scores for free at two major credit bureaus, Equifax and TransUnion, without having to worry about credit karma as often as you like.
|Hard Credit Check||Soft Credit Check|
|Background check for a new job||No||Yes|
|Pre-qualified credit card offers||No||Yes|
|Using Credible to compare rates||No||Yes|
|Applying for a new apartment||Yes||Yes|
|A private student loan or PLUS Loan application||Yes||No|
|Applying for a personal loan||Yes||No|
|Auto loan application||Yes||No|
|Applying for a credit card||Yes||No|
Effect on credit score
Soft inquiries do not affect your credit score. Although soft inquiries appear on your credit report, only you can see them.
Hard inquiries lower your credit score by a few points, although in the long run it shouldn’t be a big deal. However, in the short term, too much rigorous questioning can give lenders the impression that you are a high-risk consumer.
When an inquiry is used:
Soft inquiries are drawn on your credit every time, for example, when you receive a credit card offer in the mail, when a potential employer does a background check, or when you check your credit.
Although soft inquiries may occur without your knowledge, as in the case of the pre-approved credit card offers that you receive in the mail, a rigorous inquiry is made when you apply for a loan, credit card, or mortgage. The lender checks your credit history before giving (or refusing) a loan.
How long does the inquiry remain on your credit?
Most credit reporting is voluntary. For example, credit card issuers are not legally required to share customer information with credit bureaus. Credit bureaus also do not need to add credit card accounts to credit reports. Account information is reported and included in credit reports as it helps companies that promote their bottom line.
Inquiries are different. By law, credit bureaus are required to disclose when giving access to your credit information to anyone. According to the Fair Credit Reporting Act (FCRA), most inquiries remain on your credit report for at least 12 months. Job inquiries must remain on your credit report for up to 24 months.
Generally, credit reporting agencies choose to question your credit reports for up to two years. Yet the FICO only considers rigorous inquiries that took place in the previous year. Once a difficult inquiry is more than a year old, it does not affect your FICO score.
VantageScore is once again softer when it comes to questioning. If a rigorous inquiry lowers your VantageScore credit score, it will usually return within three to four months (unless your credit report reveals any new negative information).
Your credit score plays a big role in your financial well-being. Before applying for credit, take the time to build your credit score. With strong credit, you can improve your chances of getting approved for your desired financial product at the best possible terms and rates.
Avoid applying for multiple credit cards in less time. While a rigorous inquiry can knock a few points off your score, multiple inquiries in a short period can cause more damage unless you are rate-shopping for a home or car, in which case you will have a grace period to shop around.
Although soft and hard credit inquiries are made to assess your credit status, hard inquiries can affect your credit score for up to a year and up to 24 months on your credit report. So it’s important to understand the difference between hard and soft credit inquiries, and when each one is needed.