Know the difference between hard and soft inquiries and how they might affect your credit score.

Did you know inquiries on your credit report can affect your credit score? There are two types of inquiries—hard and soft—and credit bureaus treat them differently.

Hard inquiry vs. soft inquiry

When lenders evaluate your creditworthiness, they’ll do what’s called a hard inquiry (also called a pull) on your credit report. They look at your outstanding debt and payment history in deciding whether to extend credit and, if so, at what terms.

A hard inquiry is only done when you’ve applied for credit (such as a mortgage, credit card or personal loan). The lender’s inquiry is noted in your official credit report. A standard loan procedure is that the borrower consents to a credit check when they sign the credit application.

A soft inquiry, or pull, is done by lenders who intend to extend an offer to you. For example, credit card companies do soft pulls as part of their marketing efforts and send you a promotional mailer saying that you’re prequalified for their card. Some employers run soft credit checks as part of their hiring process. Checking your own credit score is considered a soft inquiry as well.

Hard inquiries affect your credit

Hard inquiries reflect that you’ve actually applied for credit, and they will affect your credit score. If you apply for just one loan or credit card, you may see a minor dip in your score of a few points. After a few months of good credit behavior (paying bills in full and on time) your score should go back up again.

Multiple loan or credit card applications that result in hard pulls are a concern for lenders. For example, if an individual opens several store credit cards over a short period, they’ll see a bigger dip in their credit score because lenders will see higher activity related to increasing debt.

Soft inquiries, including the ones you do yourself, don’t affect credit scores.

Why it’s important to check your credit report

The significant effect that hard inquiries have on your credit score is why you want to regularly check your credit report. If you find a hard credit error, file a dispute with the credit bureau and request that the error be corrected. Keep in mind this could be a case of mistaken identity or identity theft.

 

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