Credit Checks: Soft Inquiry vs. Hard Inquiry
Your payment history and credit utilization ratio aren’t the only things affecting your credit score. While payment history and accounts owed do tend to make up the majority of your credit score (up to 65% total for a FICO score, for example), other factors can cause your credit score to go down. Knowing the difference between a soft inquiry vs. hard inquiry is useful in this case.
Not sure what a hard inquiry is? They’re pretty important, as they can affect your credit score. And, they’re a lot more common than you might think. Here’s what to know about credit checks and how to distinguish a soft inquiry vs. a hard inquiry.
What is a Hard Inquiry?
A hard inquiry, or a hard pull, is when a financial institution such as a credit card company or a lender checks your credit as part of an accompanying credit application. That’s the important part to note, that hard inquiries are tied to credit applications. It’s not a hard inquiry simply because someone is checking your credit.
Most of the time, a single hard inquiry won’t drastically affect your credit score. But, if you have multiple hard pulls, you’ll notice that it’ll affect your credit score negatively for a while until it’s dropped from your credit report. That can take up to two years.
Why are hard inquiries so bad? Because they’re tied to a credit application, it makes it look like you’re in desperate need of cash or are about to run up high levels of debt. If you’re at risk of overspending or need to rely on various different new credit accounts to pay your bills, it indicates that you’re not financially responsible.
What qualifies as a hard inquiry?
- Mortgage loan applications
- Student loan applications
- Auto loan applications
- Credit card applications
- Personal loan applications
- Apartment rental applications
What is a Soft Inquiry?
You can check your credit score via third-party apps like Float, and your employer can check your credit score as part of the pre-employment screening process. These are considered soft inquiries, sometimes called soft pulls.
A soft inquiry isn’t tied to a credit application, which means that it doesn’t indicate you’re high-risk. Therefore, soft inquiries don’t affect your credit score. Sometimes, depending on the credit bureau, these inquiries don’t even show up on your credit report.
So, you’re able to check your own credit score as often as you like on the Float app without affecting your credit score. What else qualifies as a soft inquiry?
- Employment screening checks
- Pre-qualified credit card checks
- Pre-qualified insurance checks
If you take a look at your full credit report, you’ll be able to see a list of hard and soft inquiries. Chances are, there are a few from banks and insurance companies that have looked into your credit history to see if you qualify for a credit card offer they’d like to send you.
How to Minimize the Effect of Hard Inquiries
The easiest way to avoid hard inquiries from showing up on your credit report is to avoid applying for new credit unless it’s absolutely necessary. However, sometimes you can’t avoid it.
If you’re applying for a new credit card, do your research first to get a good idea of the best credit card for you as well as the likelihood that they’ll approve you for it. Don’t apply for card after card. Instead, do your research and shop around before applying for the one that fits you best.
As well, because mortgage loan applications and auto loan applications can show up as hard inquiries, it’s important to do your research before applying. Even though it will eventually affect your credit score, FICO gives you a 30-day grace period and VantageScore offers a two-week rolling period within which you can shop for the best rates.
So, if you’re going to be applying for a mortgage loan or auto loan, be sure to do your rate shopping within those timeframes. It’ll still impact your credit score, but they’ll count it as just one hard inquiry instead of multiple.
Can You Dispute a Hard Inquiry on Your Credit Report?
It’s important to check your credit score often to monitor any drastic changes. This ensures that there aren’t any mistakes on your credit report that you’re not aware of. And if you see that there is a hard inquiry that you weren’t aware of or that occurred without your permission, you’re able to dispute it.
Contact the reporting credit bureau directly or contact the Consumer Financial Protection Bureau for assistance.
How to Check Your Credit Report for Free
Monitoring your credit report is the easiest way to ensure there aren’t any unauthorized hard pulls on your report. And, it’s just a great way to stay on top of your financial health as you work towards building credit and optimizing your financial future.
Checking your credit score with Float is free and it never results in a hard inquiry. Access a frequently updated credit score and even share it with others. We’re the first app that allows you to control how much information your share, making it fun and easy to learn where your friends and family are at in their own credit journey.
Interested? Download the app to get started today.