Differences Between A Hard Credit Inquiry and A Soft Credit Inquiry

Credit inquiries are an essential part of the credit evaluation process used by lenders, financial institutions, and other entities that need to assess your creditworthiness. There are two types of credit inquiries: hard credit inquiries and soft credit inquiries. A hard credit inquiry occurs when you apply for credit, such as a loan, credit card, or mortgage, and the lender requests a full credit report from one or more credit bureaus. In contrast, a soft credit inquiry occurs when someone, such as a potential employer or a creditor, checks your credit report for informational purposes, but without your authorization or to offer you pre-approved credit offers. Understanding the differences between hard and soft credit inquiries can help you manage your credit score and credit report effectively.

Here are the main differences between them:

Hard Credit Inquiry:

• A hard inquiry happens when a lender or creditor checks a person’s credit report with the intent of making a lending decision.
• Hard inquiries are typically initiated when a person applies for a loan or credit card, and the lender or creditor wants to review their credit history before making a decision.
• Hard inquiries can affect a person’s credit score by a few points, typically by 5-10 points, and the impact can last up to 2 years.
• Multiple hard inquiries within a short period of time, such as applying for multiple credit cards at once, can have a more significant negative impact on a person’s credit score.
• Hard inquiries are visible on a person’s credit report for up to 2 years and are visible to other lenders and creditors who review the report.

Soft Credit Inquiry:

• A soft inquiry happens when a person or company checks a person’s credit report for non-lending purposes.
• Soft inquiries do not affect a person’s credit score and are not visible to other lenders or creditors who review the report.
• Examples of soft inquiries include checking one’s own credit report, pre-approval offers for credit, and background checks by employers.
• Soft inquiries remain on a person’s credit report for up to 2 years but do not have any negative impact on their credit score.
• Some companies, such as credit monitoring services, may perform regular soft inquiries to keep track of a person’s credit report and alert them of any changes.

Also Read:- What Is a Credit Report and What Is on It?  

Bottom line:

The key difference between a hard credit inquiry and a soft credit inquiry is the impact they have on your credit score. A hard credit inquiry can lower your credit score by a few points, while a soft credit inquiry has no effect on your credit score. Another significant difference is that hard credit inquiries require your authorization, while soft credit inquiries do not. Additionally, hard inquiries stay on your credit report for up to two years, while soft inquiries are only visible to you and do not appear on your credit report. It’s important to be aware of these differences to manage your credit score and protect your credit report from unauthorized inquiries.