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Hard Inquiries and Soft Inquiries

There are two kinds of inquiries that can occur on your credit report: hard inquiries and soft inquiries. While both types of credit inquiries enable a third party, such as you or a lender, to view your credit report, only a hard inquiry can negatively affect your credit score.

What is a hard inquiry?

Hard inquiries generally occur when a financial institution, such as a lender or credit card issuer, checks your credit report when making a lending decision. They commonly take place when you apply for a loan, credit card or mortgage, and you typically have to authorize them. Most important to note, hard inquiries might lower your credit score by a few points and they may remain on your credit report for two years. As time passes, damage to your credit score usually decreases or disappears, often even before the hard inquiry falls off your credit report.

What is a soft inquiry?

Soft inquiries typically occur when a person or company checks your credit report as part of a background check. Examples include employer background checks, getting “pre-approved” for credit card offers and checking your own credit score. A soft inquiry may occur without your permission. Soft inquiries may be recorded in your credit report, depending on the credit bureau, but they won’t affect your credit score.

One of the biggest misconceptions is that checking your own credit score using companies like Credit Karma will hurt your credit score. This is not the case. You can check your credit scores at Credit Karma as often as you like without affecting your credit score.

Examples of Hard Versus Soft Inquiries

While we mentioned some common examples of which financial actions result in a hard or soft inquiry, here are some lesser-known actions that may incur a credit inquiry.

Hard Inquiries
Soft Inquiries
Usually

  • Applying for an auto loan, student loan, business loan or personal loan
  • Applying for a credit card
  • Applying for a mortgage

Sometimes

  • Applying to rent an apartment
  • Verification of identity by a financial institution, such as a credit union or stock brokerage
  • Renting a car
  • Getting a cable or Internet account
  • Opening a checking, savings or money market account
  • Requesting a credit limit increase
  • Getting a cell phone contract
Usually

  • Checking your own credit score
  • Pre-approved credit card and loan offers
  • Background check, such as those done by employers

Sometimes

  • Applying to rent an apartment
  • Verification of identity by a financial institution, such as a credit union or stock brokerage
  • Renting a car
  • Getting a cable or Internet account
  • Opening a checking, savings or money market account

If you are unsure whether a financial action you are about to take will result in a credit inquiry, ask the financial institution or company. Also, if a financial institution or company informs you that they will be checking your credit, ask them to distinguish whether or not it is a hard or soft inquires.

Why Hard Inquiries Hurt Your Credit Score

While hard inquiries are necessary for certain financial actions, such as applying for a loan or credit card, they should be limited as much as possible. Your credit score may be penalized for multiple hard inquiries because applying for too much credit at one time may indicate that you are desperate for credit, or that you aren’t able to qualify for credit. While one hard inquiry will usually just knock a few points off your credit score, multiple hard inquiries in a short amount of time may cause significant damage to your score.

Keep your hard inquiries to one or two a year. Credit Karma data shows that on average, consumers with lower numbers of hard credit inquiries have higher credit scores.

How to Dispute Hard Credit Inquiries

If a hard inquiry occurred without your permission, check your credit reports to see the full details of the inquiry and determine if you should attempt to dispute it.

Note that you can only dispute hard inquiries that have occurred without your permission. If you have authorized the hard inquiries, it generally takes up to two years for them to be removed.

Conclusion

Before applying for credit, take time to build your credit score. With a higher credit score, you’ll improve your chance for approval for the financial products you want and at the best terms and rates.

To keep track of hard inquiries, check your credit scores and credit reports at Credit Karma. In addition to providing you with your free credit scores from TransUnion and Equifax, Credit Karma notifies you of any important changes to your TransUnion credit report, including any new hard inquiries.

If you need advice on who to speak with about getting pre-approved, give The Alexander Team a call at 314-329-9042. We have been in the business for a long time and have systems in place to help ensure you are getting the best care possible.  We are always happy to help! 
Respectively: Phyllis Alexander, Jeff Alexander, Hayley Slay, and Holli Dennis

Respectively: Phyllis Alexander, Jeff Alexander, Hayley Slay, and Holli Dennis

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