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Hard Inquiry vs. Soft Inquiry - All you need to know about them

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By: Phil Bradford
on 12th Jan,2017

Whenever your credit report is checked, it’s known as a credit inquiry. Do you know the types of credit inquiries and how they affect your credit score? If not, then check it out here and clear your doubts easily.

There are multiple factors that affect your credit score such as errors on credit report, not using credit cards, the length of credit history, types of credit in use, credit inquiries, and so on.

So, today, let’s discuss credit inquiries and their impact on credit score.

What is a credit inquiry?

When a creditor, an employer, or a financial institution requests to check your credit report before giving you a loan, employment, or a credit card, is known as a credit inquiry.

Whenever a creditor pulls your credit report, it gets reported and stays in your reports for 2 years.

You’ll find it at the end of your credit report labeled as “Credit Inquiries” or “Regular Inquiries.”

Types of credit inquiries

There are two types of credit inquiries:

  • 1 Hard inquiries
  • 2 Soft inquiries

What is a hard inquiry?

Hard inquiries take place when creditors or lenders check your credit report before making any lending decision.

It happens when you apply for a credit card, mortgage, auto loan or other loans. Basically, they check whether or not you’re creditworthy.

It may affect your credit score by few points and stays there on your credit report for 2 years.

What is a soft inquiry?

Soft inquiries trigger when an employer or a person reviews your credit report for a background check.

For instance, soft pulls occur when employers check your credit report before giving you a job, or when you check your own credit report.

Soft inquiries don’t affect your credit score and may happen without your knowledge.

# Criteria Hard Inquiries Soft Inquiries
1 Applying for auto loan, student loan, business loan or personal loan
2 Applying for credit card
3 Applying for mortgage
4 Applying for car or homeowners insurance
5 Checking own credit report
6 Pre-approval of credit card
7 Landlord or rental management company requesting credit score and credit history during tenant screening process
8 Landlord or rental management company confirming identity
9 Identity verification by financial institutions like credit union, banks, or businesses
10 Paying a rental car with a debit card
11 Applying for auto loan, student loan, business loan or personal loan
12 Requesting credit limit increase with a short credit history

How credit inquiries affect credit scores

For each hard inquiry, your FICO score may drop up to 5 points, whereas, soft inquiries won’t lower your credit score.

Though a hard inquiry hits your credit score by few points, don’t make the mistake of having too many hard inquiries. It can worsen your financial situation if you have a borderline credit score.

Don’t apply for too much credit at the same time. If it happens, creditors will draw the conclusion that you’ve been denied credit previously and now you are desperate for it. In short, you appear as a higher risk to the borrower.

However, multiple hard inquiries within a short span of time (usually 14 days) is regarded as 1 hard enquiry.

Can you dispute hard inquiries?

You can only dispute those hard inquiries that are done without your consent.

Check your credit report and get full information about your credit inquiry. But, if it’s done with your approval, it’ll take 2 years to fall off from your credit report.

Is it important to remove credit inquiries?

Unlike delinquent debts and missed payments, credit inquiries don’t affect your credit score much.

But, there are other negative items that stay on your credit report for 7 to 10 years causing severe damage to your credit score.

So, remove those items from your credit report first that are causing serious damage to your credit score. Don’t worry if you have fewer inquiries, since they’ll automatically drop off from your credit report after 2 years.

But, if your credit report contains too many negative listings, removing credit inquiries may help improve your overall credit score.

If you face difficulty, you may take help from a professional credit repair company. It’ll show you the right path to repair your credit. However, you should know that there’s nothing which a credit repair company can do and you can’t.

Some pieces of advice

Keep track of your hard credit inquiries. Build your credit score before applying for credit. Avoid applying for too many credits at one time. Take help from an expert wherever needed.

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