Back

The Difference Between Hard and Soft Credit Inquiry

by Refi.me Staff on April 14 2021

A credit inquiry is an inquiry that you or another person makes to review your credit report. This is done to take a closer look at your financial credentials and understand your financial behavior. Credit inquiries may be made by the account holder or by prospective creditors, lenders, employers or landlords. They may also be referred to as ‘credit pulls’ or ‘credit checks’.

There are two types credit inquiries – hard and soft. Understanding the differences between the two is important. These inquiries can affect whether or not you get approved for a loan. They can also affect the interest rate you pay if your loan request is approved.

What Is A Soft Credit Inquiry?    

A soft inquiry is essentially a preliminary credit screening. It occurs when you check your own credit. It may also be initiated by companies who periodically check your credit to determine if you qualify for an ongoing promotion. Lenders perform a soft credit pull to calculate your customized interest rate.

These are the most important things to know about soft credit inquiries:

  • They are usually not initiated by you. They may be conducted by third party entities even when you haven’t applied for credit.
  • Only you can see the details of soft credit inquiries made by various companies. Other lenders can’t see these details.
  • Soft credit inquiries do not impact your credit score, neither do they affect creditor lender decisions.

 What Is A Hard Credit Inquiry?

A hard credit inquiry is performed to get a more detailed look at your financial credentials. It most commonly gets triggered when you apply for any financial product such as a loan, credit card, or mortgage. A hard credit inquiry shows your payment and loan history, credit score, credit inquiries, public records, and more. This information reveals a lot about your ability to repay your loan on time.

Lenders perform hard credit inquiries to finalize their loan approval decision and calculate your customized interest rate.

These are the most important things to know about hard credit inquiries:

  • They get triggered only when you apply for a loan or credit card and give consent to the lender or financial institution. If a hard check is done without your consent, you can file a dispute and get it erased from your record.
  • Potential lenders can view all hard inquiries when they check your credit report.
  • Hard credit inquiries can have a negative effect on your credit score. This can impact your ability to borrow money. It will also impact your cost of borrowing.
  • These inquiries stay in your credit report for 2 years but they affect your score only for the first 12 months. As the inquiry gets older, it has a progressively lesser impact on your score till at some point it no longer counts.
  • Every hard inquiry can drop your score by about 5 to 10 points.

Protecting Your Credit Score

In general, you must try as much as possible to limit the number of hard credit inquiries. One way to do this is to limit the number of credit cards and loans you apply for. Applying for financial products only when you absolutely need them is the best way to protect your credit score.

We hoped you enjoyed this article! Remember, you can and potentially lower your monthly student loan payments and save money.

The Refi.me team is always here to help you