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Hard vs. Soft Inquiry: What’s the Difference?

Hard vs. Soft Inquiry: What’s the Difference?

Every time you apply for credit, the potential creditor or lender checks your credit history. In doing so, they could also be impacting your score.

There are two types of credit inquiries: hard inquiries and soft inquiries. Depending on which the creditor is performing, you could see your credit score change. Here’s a quick look at the difference between hard and soft inquiries, what they mean, and just how much they can impact your credit score.

Soft Inquiries

A soft inquiry, or “soft pull”, generates the same information that a hard credit inquiry would, including your credit and payment history, debt management, your credit score, and any derogatory marks you may have.  It also has no affect on your credit score.

Soft pulls normally occur when you check your own credit report, when a credit card company offers you a pre-approval, or when a potential employer pulls your report as part of the screening process.

Hard Inquiries

Hard inquiries, or “hard pulls”, occur when a lender or creditor reviews your credit report (with your permission) as part of their decision-making process. Hard pulls show you’ve applied somewhere to get credit, such as a mortgage, credit card, or auto loan. A hard pull also occurs when a landlord checks your credit before approving your rental application.

A hard inquiry has a temporary negative effect on your credit score, mainly a several point deduction from your score. However, many hard pulls within a short period of time can cause large negative deductions. That’s because multiple hard inquiries could add up to numerous new accounts, which may indicate that you’re at risk of overspending or are having a hard time paying off bills.

The exception to this is when there are multiple inquiries for the same type of product, like a mortgage or auto loan, in a short amount of time. Most credit scoring models take into account that you may be rate shopping for products like these, and will therefore count these as a single inquiry, rather than multiple, separate ones.

Hard inquiries remain on your credit report for a little over two years. After 12 months, however, they no longer impact your score.

 

For more information on credit resources, check out our website.
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