Soft Inquiry vs. Hard Inquiry: How Do They Affect Your Credit?

When shopping for loans or credit cards online, you’ve likely come across warnings about the impact on your credit score. By understanding hard and soft inquiries and how they affect your credit score, you can minimize the damage.

Hard Inquiries

A hard inquiry appears on your credit report when you apply for new credit. A hard inquiry requires your signature. When you sign an application for a loan, credit card, or another credit line you authorize a hard inquiry on your credit score.

Hard inquiries affect your credit score. The impact will vary but a single hard inquiry will usually lower your credit score by five points or less. The impact may be larger if you have a thin credit file with a short credit history and few records.

Multiple hard inquiries will have a greater impact on your credit. Numerous hard inquiries in a short period make you look like you are desperate for credit, and that suggests that you are a risk. Each hard inquiry you add will have a greater impact on your credit.

👉 A hard inquiry remains on your credit report for two years, but its impact on your credit fades rapidly. After one year a hard inquiry will have no impact on your credit. Anyone who is authorized to view your credit report can see all the hard inquiries recorded there.

Managing Hard Inquiries

You will have hard inquiries on your credit report. That’s not something to worry about, as long as you don’t overdo it. Keep these points in mind:

• Only apply for new credit when you really need it. Make sure you have a specific purpose when you apply for a new credit line.
• Space out your applications for new credit. Avoid applying more than once in any six-month period.
• If you are planning to apply for a major loan, like a mortgage or car loan, avoid making any other credit applications. Even a small change in your credit score could have a significant impact on your interest rate.

The credit bureaus and credit scoring companies make an exception for comparison shopping. If you make multiple applications for the same type of credit within a short period, the credit bureaus will recognize that you are shopping for the best deal and record only a single hard inquiry.

The period may vary but if you’re shopping for a loan or credit card your safest bet is to keep all of your inquiries within a 15-day period.

Soft Inquiries

Soft inquiries can be made without your permission. They differ from hard inquiries in two significant ways.

• A soft inquiry has no impact on your credit score.
• Only you can see soft inquiries on your credit report.

Soft inquiries can come from several different sources. One of the most common is when you check your own credit. Here are some others.

• Credit card and insurance companies make soft inquiries before they make pre-qualified offers.
• Existing creditors can run a soft credit check at any time to check your credit status.
• Credit counselors do a soft credit check to evaluate your debts.
• Employers ofted do a soft pull to evaluate a potential employee.
• Car insurance companies may make a soft pull when they are assessing the risk you pose.

In some situations, you may not be sure if an action will produce a hard or soft inquiry. If you apply for utility service, rent a car, or apply for an apartment, you will sign an application. That application could authorize a hard inquiry.

⚠️ Before you sign an application for any financial transaction, read the agreement carefully to see if it authorizes a credit inquiry.

Inquiries on Your Credit Report

You should check your credit reports regularly and understand how to read a credit report. You are entitled to one free credit report from each of the three major credit bureaus every year, and you may be entitled to further free reports under some circumstances.

You should check hard and soft pulls when you read your credit report.

Check hard pulls carefully: they affect your credit. You should recognize each hard inquiry on your credit report and know what application it came from.

Soft inquiries are less important but it’s good to review those as well. You want to know who has been looking at your credit report.

What To Do If You See an Inquiry You Don’t Recognize

An inquiry you don’t recognize is not necessarily a problem. Sometimes companies record inquiries under a different name than the business you applied with. Other companies may pass your application to another lender. If you applied for credit from a car dealer, for example, they could send that application on to several lenders.

Each inquiry should have a company name and a phone number. Call the number and ask why the company is checking your credit.

If the Company has no satisfactory explanation or if they refer to an application you did not authorize, it’s important to determine whether this was a mistake (they do happen) or an attempt at identity theft.

If you see an unauthorized hard inquiry on your credit report or if you believe that several hard inquiries were registered from one application, use the credit dispute process to have the suspect inquiries removed. You may wish to ask the credit bureau to investigate unauthorized hard or soft inquiries if you suspect identity theft.

👉 Don’t bother disputing a legitimate inquiry. You probably won’t succeed and the impact on your credit will be very small.

Who Can Check Your Credit?

The Fair Credit Reporting Act (FCRA) regulates credit reporting, including who can check your credit and when they can check it. Businesses with a specific and legitimate purpose are allowed to check your credit. For a hard inquiry, they’ll need your written permission to do so, except in some rare cases.

The law is less strict about soft inquiries, so those may be done without your explicit permission. If you have received a “you’re pre-approved!” letter in the mail from a credit card company, you can safely assume that the company performed a soft inquiry to pre-approve you for their card.

For hard inquiries, in most cases, businesses need to receive your permission to check your credit. This includes lenders such as banks, utility companies, insurance companies, landlords, and employers. There are very few instances where your permission is not needed. Some examples include credit checks related to child support determinations, a court order, or a federal grand jury subpoena. 

Typically, you grant permission to perform a hard inquiry when you submit a credit application. You’ll be informed of it and you’ll need to agree to allow a credit check to be performed in order to have your application considered. This information may be in the fine print of an agreement or application, but it has to be there. Always read every word!

When getting quotes, you may also be asked for permission to perform a soft credit pull. Remember that a hard inquiry is performed when you actually submit an application to something, not when you’re just getting quotes.

Should You Be Concerned About Inquiries?

You can’t avoid inquiries unless you don’t use credit at all. Hard inquiries will affect your credit, but their impact is minor and you should not worry about applying for a needed line of credit just because of the inquiry.

If you manage your inquiries effectively and keep careful track of the inquiries on your credit report, they will do minimal harm and can provide valuable information about who is checking your credit and why.

Managing your inquiries is part of building a great credit score, but it’s really not the most important part. If you’re trying to build better credit you should put most of your effort into keeping a good payment history, avoiding late payments, charge-offs, and collection accounts, and keeping your credit utilization low.

If you’re managing your credit well and checking your credit reports regularly, inquiries should not be a major concern!