What’s the Difference Between a Hard and Soft Inquiry?
Discover how different types of credit inquiries affect your financial health and credit score. Understand their implications.
Credit inquiries serve as a record whenever information from your credit report is accessed. These records provide a snapshot of your credit history, which can be reviewed by various entities for different purposes. Understanding how these inquiries function is important for managing your financial profile.
Understanding Hard Inquiries
A hard inquiry occurs when a lender or creditor reviews your full credit report to extend new credit. This happens when you formally apply for a mortgage, an auto loan, a student loan, or a new credit card. Such inquiries require your explicit permission, often obtained through your signature on a credit application. Lenders use these reports to assess your financial responsibility and the risk associated with lending to you.
A single hard inquiry can lead to a slight, temporary dip in your credit score, usually by fewer than five points. The effect on your score lasts for up to one year, though the inquiry itself can remain on your credit report for up to two years. When shopping for certain types of loans, such as mortgages or auto loans, multiple inquiries made within a concentrated period are often treated as a single event for scoring purposes. This “rate shopping” window can range from 14 to 45 days, allowing consumers to compare offers without penalizing their score for each check.
Understanding Soft Inquiries
A soft inquiry involves a review of your credit information that does not impact your credit score. These inquiries often occur without your direct permission because they are not tied to an application for new credit. For instance, checking your own credit report is a common example of a soft inquiry, allowing you to monitor your financial information without affecting your score.
Companies may also perform soft inquiries for pre-screening purposes, such as sending you pre-approved credit offers. Existing creditors might conduct soft inquiries to review your account for management purposes, like determining eligibility for a credit limit increase. These types of inquiries are only visible to you when you access your own credit report and are not seen by other lenders.
Key Differences and Their Implications
The fundamental distinctions between hard and soft inquiries lie in their purpose, the necessity of consent, and their impact on your credit score. Hard inquiries are directly linked to applications for new credit, signaling you are seeking additional debt. They require your explicit permission and can temporarily reduce your credit score, reflecting increased risk. Hard inquiries remain visible to other lenders for up to two years.
Conversely, soft inquiries are primarily informational or for account management, such as checking your own credit report or pre-screening offers. They do not require direct permission. Since soft inquiries are not indicative of new credit-seeking behavior, they have no effect on your credit score. These inquiries are typically only visible to you.
Monitoring Inquiries on Your Credit Report
Regularly reviewing your credit report allows you to see both hard and soft inquiries. You can obtain a free copy of your credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—once every week through AnnualCreditReport.com.
Once you access your credit report, you will find a dedicated section detailing all inquiries. Examining this section can help you confirm that all listed inquiries are legitimate and that you recognize the source of each request. Identifying any unfamiliar or unauthorized hard inquiries is important, as this could signal potential fraudulent activity or errors that require immediate investigation and dispute with the respective credit bureau.