When you apply for a loan, credit card, or apartment, you’ll likely see references to “hard inquiries” and “soft inquiries” to your credit report. The differences may seem negligible as a consumer (after all, the companies do the work, while you don’t have to do much of anything), but it’s important to understand the difference between them: One can potentially impact your credit scores, and the other one doesn’t.
What is a soft credit inquiry?
A soft inquiry, or “soft pull,” refers to when your credit report is checked, but it’s not tied to an application for new credit or a loan. Soft inquiries have no effect on your credit scores. Some common examples of soft inquiries include:
Checking your own credit report
An employer checking your credit for employment purposes
Credit card companies checking for promotional offers
Lenders giving you pre-approved credit offers
Since soft inquiries don’t impact your scoring, you don’t have to worry about how many accumulate on your credit reports over time.
What is a hard credit inquiry?
A hard credit inquiry occurs when a lender, credit card issuer, or other financial company checks your credit report because you have formally applied for new credit or a loan product with them. Examples of hard pulls include:
Applying for a new credit card, mortgage, auto loan, student loan, etc.
Applying to rent an apartment or home
Requesting a credit limit increase from an existing lender
Unlike soft inquiries, hard inquiries can potentially cause a small, temporary drop in your credit scores, typically around five points or less. However, the impact diminishes over time as the inquiries get older.
Hard inquiry impact and limits
While a single hard inquiry likely won’t lead to a huge credit score drop, it’s still wise to minimize them as much as possible. Applying for multiple credit products in a short period can lead to several hard inquiries stacking up, which can then significantly impact your scores. Most credit scoring models look at inquiries from the last 12 months when calculating your scores. Additionally, multiple inquiries for mortgage, auto, or student loans within a short period (14-45 days typically) may be counted as a single inquiry to allow for rate shopping.
The bottom line
Soft inquiries have no impact on credit scores, while hard inquiries can cause a small, temporary scoring drop. Before applying for new credit, check your credit reports to monitor your inquiries, and try to avoid unnecessary applications and credit checks, when possible.
