There are many intricate details that build your credit score. This includes the amount of new credit that you receive, the amount you currently owe, and your payment history. But, another factor that goes into your overall credit score is the number of times that it’s checked by specific institutions. Credit checks are put into two categories: hard inquiries and soft inquiries. It’s important to know how each type of inquiry affects your credit so you can have more control over your credit score as a whole.
Hard Credit Inquiries
Hard inquiries (often known as hard pulls) happen when someone is trying to decide whether to loan money to you or not. They are supposed to happen with your consent only. When you’re trying to apply for a student loan, an auto loan, or a home loan, credit checks from these affiliates companies will stick to your credit report. These credit checks do affect your credit score and can take off as much as five points from your FICO score. Mostly, they’ll have a minor, if any, effect on your credit score. Hard inquiries only stay on your credit score for about two years, and they often stop affecting your credit score after one.
If you’re trying to shop around for a credit card or a student loan, it’s best to not procrastinate and only apply for credit cards that you think you’ll receive. All those inquiries within a 14 to 45-day period are considered one inquiry on your credit report. So, if you’re looking to shop around, be sure to stay smart during your journey. But, having an excessive amount of hard inquiries might make you seem high-risk to lenders. Don’t let these facts keep you from shopping around for the lowest interest, but also don’t go crazy with your applying. Also, keep in mind that FICO gives a 30-day grace before loan inquiries are affected in your credit score. If you can minimize the number of hard inquiries that you have on your credit report, then it’s a good idea to do just that.
Soft Credit Inquiries
On the other hand, soft inquiries (or soft pulls) don’t affect your credit score at all. They’re utilized for a variety of different reasons often without your permission, including when credit card pre-approve you for loans. It wouldn’t be in their best interest to waste postage on a person that they would probably not accept, so they check their credit. Also, when companies do background checks, soft inquiries happen as well. Companies might check your credit as an indicator that you’re a responsible adult with good habits. Also, when you check your own credit score it doesn’t affect it at all. It’s often a common misconception that checking your own credit score will lower it, but that’s just not the case. Whether you’re getting your free yearly credit report from any of the credit bureaus or using an on-demand service like Credit Karma, they’re all recorded as soft inquiries. These types of inquiries might be included on your credit report, but that often depends on the specific credit bureau. You can check your credit score as often as you’d like.
Hard or Soft Credit Inquiries: More Information
There are certain situations that could involve either a hard inquiry or a soft inquiry. They include leasing a car, opening up a utility account, requesting a higher credit limit, and more.
If you’re not sure whether a credit check is going to be recorded as a soft inquiry or a hard inquiry, then it’s important to get in contact with the lender or financial institution. Being informed with it comes to your financial history is very important. Also, if there’s a hard inquiry on your report that you didn’t authorize you can get in contact with them and ask them to remove it. If they aren’t budging, then you can dispute them directly with the credit unions. It’s very important to keep the information on your credit score as up-to-date as possible to get the most honest report.
To best protect yourself against the effect of hard inquiries, it’s important to maintain a solid credit score in order to minimize the effect that a hard inquiry would have on your credit. Also, ask them if you can do a soft inquiry instead. It might be just as effective for you to pull on your own credit report, print it out, and show them instead of them doing a hard inquiry on your own.
Hard inquiries and soft inquiries are very different, but they’re both important to know when it comes to your credit. Hard inquiries happen with your consent, and they often affect your credit score in some way. Soft inquiries often happen without your permission, but they don’t affect your credit score. Knowing these two separate concepts gives you the best chance of taking control of your credit score and staying as fiscally responsible as possible.