Hard vs. Soft Credit Inquiries

You know all about credit scores, right? How they are calculated and how important a good credit score is when you are ready to get a loan, rent an apartment, or buy a car.

However, do you know about Credit Inquiries?

There are two kinds of inquiries on a credit report: Hard Inquiries and Soft Inquiries. Both types of these inquiries enable a third party company to view your credit report. Knowing the difference between a hard inquiry and a soft inquiry on your credit report is important. A hard inquiry can affect your credit score, which in turn can change the interest rate you qualify for on a loan. A soft inquiry, although visible to you on your credit report, will not be shown to lenders and it has no effect on your score.

Soft Inquiries

Individuals or businesses use these credit inquiries as part of a background check. Examples include checking your own credit score, employers, landlords, and pre-approved credit card offers. These inquiries can be pulled without your permission, but do not have any adverse effects on your credit report.

Hard Inquiries

Lenders use hard inquiries to make a decision on applications for a loan, whether it is a credit card, mortgage, or any other type of loan application. These inquiries need to be authorized by the applicant before the credit report is pulled. These inquiries will temporarily affect your credit score by a few points and remain on your credit report for two years.

Why Hard Inquiries Hurt Your Credit Score

Hard inquiries are necessary for loan or credit card applications, but they should be limited as much as possible. When you have multiple hard inquiries, it will negatively affect your credit score because applying for too much credit at one time may indicate that you cannot qualify for the credit you need. One hard inquiry will only take a few points off your credit score, but multiple inquiries in a short amount of time can cause significant damage. It is best to keep your hard inquiries to one or two in a year, if possible.

If you are unsure if an inquiry is going to be considered hard or soft, it is best to ask the potential creditor. They will understand your concern, and appreciate how hard you have worked for your good credit. Having a higher credit score improves your chances of being approved for the financial products you need at the best rates and terms.

Robins Financial Credit Union offers eligible members the ability to view their FICO® Score within Online Banking. Log into your Online Banking today to start reviewing your FICO® Score.

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