Hard and Soft Credit Inquiries: What They Are And Why They Matter
Understanding how credit works is the first step towards improving your credit.
- February 5, 2020
- Credit Score
- 7 min read
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Back in the day, when you wanted to find out your credit score, you had options that didn’t trigger what’s called a “hard inquiry.” A hard inquiry of your credit can cause your credit score to drop, so checking it was always something done cautiously. Nowadays, new and online resources can allow people to find out their credit score without triggering a hard inquiry, instead triggering what’s called a “soft inquiry,” which does not impact your credit score.
These two types of credit inquiries — or credit pulls — have some fundamental differences that many Americans might not understand. Read on to find out what hard and soft inquiries are, why they matter and how long they stay on your credit report.
Hard inquiries of your credit typically occur when a financial institution, such as a lender or credit card issuer, checks your credit to help make a lending decision. Some of the most common times this occurs is when you apply for a home mortgage, loan, line of credit or credit card. What’s important to note is that, when doing a hard pull of your credit, these institutions usually have to ask you to authorize the credit check.
Related: FICO Credit Score Ranges Explained
It is not uncommon for a hard pull of your credit to lower your scores by a few points. On the other hand, it could have next to no effect on your scores, each case varies. The good news is that, even if a hard inquiry does lower your credit score, the negative impact is only temporary. In general, a single hard inquiry is not likely to have a major effect on whether you get approved for a new credit card or loan.
Typically, hard inquiries remain on your credit reports for about two years. The temporary negative effect of a hard pull is much shorter than that. What you should really watch out for is making too many credit inquiries in a short period of time.
For instance, you would not want to apply for a personal loan and an auto loan all at once, or even within a short window of time. Besides the fact that these hard inquiries could pull your credit score down, lenders and credit card issuers will immediately take notice. In their eyes, making multiple hard inquiries in a short period comes across as a potential higher-risk customer.
Because hard inquiries can have an impact on your credit scores and stay on credit reports for two years, some people often want to know if they can be removed. The good news is there are some inquiries that can be eligible for removal. However, the eligibility for removal is fairly limited and is generally only applicable for unrecognized or unauthorized activity. Here’s the dispute and removal of hard inquiry process:
- Dispute the inquiry by certified letter, addressed to each of the three credit bureaus.
- In the credit inquiry removal letter, include the reason for the letter, the company that requested your information, the reason you’re disputing it and your request to have the hard inquiry removed.
- Include your credit report and highlight the inquiries to identify items to investigate and consider for removal.
Soft inquiries, or soft pulls, of your credit occur when a landlord or company, for example, look at your credit as part of a background check. A soft inquiry is also what occurs when you check your credit score for your own knowledge, through websites like CreditKarma, Credit Sesame, Experian or your credit card provider, who might provide this service. Another common situation for soft inquiries is when you prequalify for a credit card. This is the preliminary credit check that occurs before you fill out a credit card application, that lets you know if you’re likely to qualify for a credit card. Employers often do a soft inquiry of new employees’ credit as part of a background check.
Soft pulls of your credit will not impact your credit scores, unlike a hard inquiry. One of the fundamental differences between these two types of inquiries is that a soft inquiry usually happens when someone checks your credit report only. However, if you are submitting a new application for credit, such as a loan or credit card application, then a hard inquiry will occur. Since soft inquiries are not connected to an application for credit, they are not considered an indicator of increased risk and therefore don’t affect your credit scores.
Soft inquiries are helpful because you can do trigger them yourself and not get dinged on your credit score. This is very useful for someone building, rebuilding or just improving their credit because you can keep track of your progress month over month without worrying about hard inquiries negatively impacting your score.
If you want to see your FICO scores for free, you can go through a number of channels. These include:
- Credit card issuers: Many credit card issuers provide their customers with free access to their FICO score. Check out the website or app of your credit card issuer for more information.
- Credit unions and banks: Many credit unions and banks offer a free look at your FICO score. Contact your financial institution for more information.
When it comes to VantageScores, you can review your VantageScore 3.0 credit scores from two of the three major credit agencies, TransUnion and Equifax. From these two bureaus, you can see your VantageScore 3.0 through several types of institutions:
- Banks and lenders: Certain banks and lenders can provide this information to their customers.
- Direct-to-Consumers/Non-lenders: Additionally, a number of companies also provide this information, sometimes for free but sometimes for a price. Be sure to read the fine print.
What’s great about soft inquiries is that you can view them on your credit reports when you check your credit. However, credit bureaus typically do not include soft inquiries on the reports they send to creditors; instead, they’ll see hard inquiries.
There are some exceptions to this, but, fortunately, none of the cases will impact your credit scores. For instance, if you authorize a debt settlement company to review your credit, their inquiry, in this case, maybe visible to your creditors. Again, however, such an inquiry would not result in lowering your credit scores like a hard pull of your credit would.
Once every 12 months, you can request a free copy of your credit report from one of the “Big-Three” consumer credit bureaus:
The length of time soft inquiries remain on your credit report is trivial because soft inquiries have no effect on your credit history or credit scores. Again, they’re visible when you review your own report but they aren’t typically visible to creditors. As such, attempting to remove soft inquiries from your credit report is largely pointless as well.
The basic criteria for triggering a hard inquiry of your credit is when you make an application for new credit — be it a credit card application, application for a mortgage loan or auto loan, a personal or business line of credit and other types of credit. Due to hard inquiries being directly related to an application for credit, they signify the potential for increased risk — because you’re looking to open a new form of credit, which involves borrowing and repaying money. Therefore, hard inquiries temporarily have a negative impact on your credit score.
A soft inquiry is not triggered by or related to an application for new credit. Hence, they have no impact on credit. Soft inquiries are triggered by you personally when you want to review your credit scores. They’re also triggered by common background checks, such as for a lease or employment.
A good way to know for yourself when a hard versus a soft inquiry will occur is based on whether you gave the lender or credit card issuer permission to check your credit. When you give authorization to a lender or credit card company, it is likely a hard inquiry will be reported. If you didn’t give express authorization, such as during a credit card prequalification, the result it should be reported as a soft inquiry.
Here’s a look at some common examples that trigger hard inquiries versus soft inquiries of your credit. Keep in mind that these are merely popular situations and do not include all possible circumstances.
Here are some common things that can trigger a hard inquiry:
- Mortgage loan applications
- Auto loan applications
- Credit card applications
- Student loan applications
- Personal loan applications
Here are some common actions that can trigger a soft inquiry:
- Checking your credit scores on websites non-lender websites, through your bank or through your credit card issuer
- Prequalification prior to applying for a credit card
- Prequalification for insurance quotes
- Employment verification and similar background checks
You may find yourself in a situation where you still don’t know which type of inquiry will be reported. If so, you can always ask the company, credit card issuer or financial institution involved to find out which type of credit pull it will be, a hard or soft credit inquiry. Make sure to do this before the credit pull.
Probably the most important point to take away about hard inquiries versus soft inquiries is that the former takes place when you make an application for new credit. If there is no application for new credit or no express authorization by you for a credit inquiry, then it is generally a soft inquiry. This is why when you check your own credit scores there’s no application process to go through — you’re not applying for credit when you look at your own credit scores. It’s also important to remember that a hard inquiry does have a temporary negative impact on your credit scores and does stay on your credit report for typically two years. So, be strategic about applying for credit because if handled without care, you could harm your chances of getting approved.
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