What’s the Difference Between a Hard Inquiry and a Soft Inquiry?
Unpack the key differences between hard and soft credit inquiries. See how each type affects your credit score and overall financial health.
A credit inquiry represents a request to access an individual’s credit information. These inquiries are recorded on a credit report, providing a record of who has accessed credit data and when. Understanding the different types of credit inquiries is important for maintaining sound financial health. This record helps financial institutions assess an individual’s creditworthiness when making lending decisions.
Understanding Hard Inquiries
A hard inquiry, often referred to as a “hard pull” or “hard credit check,” occurs when a lender formally requests to review your credit report as part of a credit application. This type of inquiry typically happens when you apply for new credit products, signaling to credit bureaus that you are seeking additional debt. Explicit permission from the applicant is generally required before a hard inquiry can be performed.
Common situations that trigger a hard inquiry include applying for a new credit card, seeking an auto loan, or requesting a mortgage. Personal loans, student loans, and even some requests for a credit limit increase on an existing account may also result in a hard pull. These inquiries are recorded on your credit report and are visible to other potential lenders for up to two years, allowing them to see your recent credit-seeking behavior.
Understanding Soft Inquiries
A soft inquiry, also known as a “soft pull” or “soft credit check,” involves a review of your credit report that does not impact your credit score. These inquiries often occur without your direct permission, as they are not tied to a specific application for new credit. They serve informational or administrative purposes rather than a lending decision.
Examples of soft inquiries include checking your own credit score or report. Other instances involve pre-approved credit card offers from lenders or background checks conducted by potential employers. Insurance companies may also perform soft inquiries when providing quotes, and utility providers might use them for service activation. Soft inquiries are typically only visible to you on your credit report and are not seen by other lenders.
Distinguishing the Two
The primary distinction between hard and soft inquiries lies in their impact on your credit score. Hard inquiries can temporarily lower your credit score by a few points, typically fewer than five points. This reduction occurs because applying for new credit can signal an increased risk to lenders, especially if multiple applications are made within a short timeframe. Soft inquiries do not affect your credit score at all, making them a safe way to monitor your credit health or explore pre-approved offers.
Another key difference is the requirement for permission. Hard inquiries always require your explicit authorization, usually obtained when you sign a credit application. Soft inquiries, however, typically do not require your direct permission, as they are often initiated by companies for marketing purposes, account reviews, or by you checking your own report. This distinction highlights the formal nature of hard inquiries compared to the more passive nature of soft inquiries.
Visibility on your credit report also varies between the two types. Hard inquiries are recorded on your credit report and are visible to all lenders. This allows lenders to see a history of your credit-seeking activities. In contrast, soft inquiries may or may not appear on your credit report, but if they do, they are generally only visible to you and not to other lenders.
The purpose behind each inquiry type also differentiates them significantly. Hard inquiries are initiated by consumers when they formally apply for new credit, such as a loan or credit card, and lenders use them to make underwriting decisions. Soft inquiries, on the other hand, are typically for informational purposes, such as pre-qualifying for offers, conducting background checks, or when an existing creditor reviews your account. This difference in intent dictates their respective impacts.
Both hard and soft inquiries can remain on your credit report for up to two years. However, the impact of a hard inquiry on your credit score typically diminishes after 12 months, and most scoring models only consider inquiries from the most recent 12 months for scoring purposes. For certain types of loans, such as mortgages or auto loans, multiple hard inquiries made within a short “rate shopping” window (typically 14 to 45 days) are often counted as a single inquiry, minimizing their collective impact. This allows consumers to compare rates without undue penalty.
Monitoring Inquiries
Regularly checking your credit reports is important for managing your financial well-being. You can obtain a free copy of your credit report annually from each of the three major credit bureaus—Experian, Equifax, and TransUnion—through AnnualCreditReport.com. Reviewing these reports allows you to verify the accuracy of recorded inquiries and identify any unfamiliar or unauthorized activity, which could indicate potential fraud. This proactive approach helps ensure the integrity of your credit information.