While a soft credit inquiry won’t have an impact on your scores, a hard credit inquiry may do so and will remain on your credit reports for around two years.
If you applied for financing or other credit and the lender reviewed your credit scores as part of the process, you’ve undoubtedly had a hard credit inquiry.
When you apply for credit or financing and the lender examines your credit scores, they typically perform a hard credit inquiry, or “hard pull.” This involves the lender officially reviewing your credit reports, which allows them to evaluate your credit history, payment behavior, any negative marks, credit utilization, and credit management duration. These factors help lenders determine whether to approve your application or offer additional credit.
To prepare for a hard credit pull, it’s beneficial to monitor your credit reports and ensure there are no surprises. On the other hand, when you check your own credit reports, it involves a soft credit inquiry, or “soft pull.”
Now, let’s delve into the distinctions between hard credit inquiries and soft credit inquiries.
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What exactly is a hard inquiry?
What is soft inquiry?
Examples of both hard and soft credit inquiries
How do I contest hard credit checks?
The best way to lessen the impact of hard credit inquiries
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What exactly is a hard inquiry?
When a financial institution, such as a lender or credit card issuer, evaluates your credit as part of the decision-making process for a loan or credit application, this is when hard inquiries often take place. These inquiries frequently take place when you apply for a credit card, loan, or mortgage and are typically allowed by you.
While a single hard inquiry may cause a slight decrease in your credit scores, the impact is usually minimal and temporary. The effect on your scores tends to diminish over time, even before the inquiry is removed from your credit reports, which typically takes about two years. Therefore, the impact of a single hard inquiry is not significant enough to greatly influence your chances of approval for new credit.
However, it is important to be cautious about applying for multiple credit cards within a short timeframe. Having multiple hard inquiries in a brief period might raise concerns for lenders and credit card issuers, as it may indicate a potential cash shortage or a plan to accumulate a significant amount of debt. To mitigate this risk, it’s advisable to space out your credit card applications over time.
How many inquiries are too many?
Depending on a person’s specific situation and credit history as a whole, the effect of hard inquiries on credit ratings can change. Typically, one or two hard inquiries won’t significantly lower your credit scores; they’ll probably only cause a slight drop.
However, it may have a more pronounced effect on your marks if you amass a significant number of challenging questions in a short amount of time. Multiple credit applications could be interpreted by lenders and credit-scoring models as a higher-risk habit, which could further damage your scores.
It’s important to note that there are exceptions when shopping for specific types of loans, such as car loans, student loans, or mortgages, where multiple inquiries within a specific timeframe may be treated as a single inquiry.
To minimize the impact of hard inquiries, it is advisable to be cautious about applying for too much credit within a short span of time. Spacing out your credit applications over time can help mitigate the risk of negative consequences for your credit scores.
What is soft inquiry?
Soft inquiries, also referred to as “soft pulls” or “soft credit checks,” typically occur when your credit is checked for background purposes rather than for a specific credit application. For example, credit card issuers may conduct soft inquiries to assess if you qualify for certain credit card offers, and employers may perform soft inquiries as part of the hiring process.
Unlike hard inquiries, soft inquiries do not impact your credit scores. While they may or may not be recorded in your credit reports, soft inquiries are generally visible only to you when you review your credit reports.
Does checking your credit score account for hard inquiries?
Checking your own credit scores does not result in a hard inquiry. It is considered a soft credit check, which means it does not have any negative effect on your scores. Platforms like Bankbl provide free access to your VantageScore 3.0 credit scores from Equifax and TransUnion, allowing you to check your scores as frequently as you like without impacting them.
Examples of both hard and soft credit inquiries
The distinction between a hard inquiry and a soft inquiry primarily depends on whether you provided consent for the lender to check your credit. If permission was given, it is likely reported as a hard inquiry, whereas inquiries made without your permission are typically reported as soft inquiries.
Here are some examples of situations that typically result in hard or soft inquiries on your credit reports. It’s important to note that these lists are not exhaustive and serve as general guidelines:
Common hard inquiries:
- Mortgage applications
- Auto loan applications
- Credit card applications
- Student loan applications
- Personal loan applications
- Apartment rental applications
Common soft inquiries:
- Checking your credit score on platforms like BankBl
- “Prequalified” credit card offers
- “Prequalified” insurance quotes
- Employment verification (background check)
It’s worth noting that there are other types of credit checks that can be classified as either hard or soft inquiries. For example, utility, cable, internet, and cell phone providers often check your credit, but the classification may vary.
If you are unsure about the classification of a specific inquiry, it is advisable to ask the company, credit card issuer, or financial institution involved to clarify whether it will be recorded as a hard or soft credit inquiry.
How do I contest hard credit checks?
We highly recommend regularly monitoring your credit reports for any inaccuracies or unauthorized activities, including instances of hard inquiries made without your permission. If you come across such errors, it is essential to take action by disputing them with the respective credit bureau. In case you require further assistance, you can reach out to the Consumer Financial Protection Bureau (CFPB).
Detecting unauthorized hard inquiries could potentially indicate identity theft, as highlighted by Experian, one of the major credit bureaus. It is crucial to investigate such incidents and understand the underlying circumstances.
However, please note that you can only dispute hard inquiries that occurred without your authorization. When you have provided consent for a hard inquiry, it typically remains on your credit reports for a period of two years before it is removed automatically.
The best way to lessen the impact of hard credit inquiries
When you’re in the process of purchasing a home or car, it’s important not to let the fear of accumulating multiple hard inquiries deter you from shopping for the best interest rates available.
Additionally, multiple inquiries made within a specific time frame, usually around 14 days, for the same type of loan (e.g., a mortgage or auto loan) are often treated as a single inquiry by FICO.
While some lenders may use scoring models that offer a longer shopping period without incurring additional hard inquiries, it is advisable to limit your comparison shopping to approximately 14 days. This is because you may not know which scoring model a specific lender utilizes to generate your credit score.
Don’t let your fear of making many queries prevent you from discovering the best terms and rates. Instead, take the time to shop around and compare offers in order to locate them.
Next actions
Your overall financial health is significantly impacted by your credit ratings. Prior to requesting credit, it is essential to take the necessary actions to establish and maintain good credit. You can boost your chances of being approved for the financial goods you want and get better terms and fees by improving your credit.
Avoid applying for several credit cards quickly if you want to protect your credit scores. While a single difficult question can result in a modest drop in your scores, numerous difficult questions in a short period of time can do more serious harm. However, it’s crucial to keep in mind that there is frequently a grace period where numerous queries made within a certain window are counted as a single inquiry when comparing rates for a home or vehicle loan.
Check your credit reports from Equifax and TransUnion on a regular basis through BankBL or other dependable sources to stay up-to-date on any hard inquiries that could damage your credit ratings. You can maintain vigilance and make sure the information supplied is accurate by checking your credit reports often.