What are hard and soft credit score inquiries?
There are two types of credit score inquiries lenders and others (like yourself or your landlord) can make on your credit score: a "hard inquiry" and a "soft inquiry." The difference between the two is that a soft inquiry won't affect your score, but a hard inquiry can shave off some points.
Here's what hard and soft inquiries are all about: why there's a difference, and who makes them.
Soft inquiries may not affect your credit score directly, but they can be viewed on your reports by either yourself or lenders. When you apply for a line of credit, lenders will usually perform soft inquiries for an overview of the basic details on your credit score, including how often you've applied for credit. This information is usually gathered by scoring models calculated by the three credit reporting bureaus.
Hard inquiries do affect your credit score and can be pulled for a variety of reasons, such as a credit check or proof of conditional approval for loans. A hard inquiry is usually only performed when you have completed a full application for a credit card or loan. Some credit card companies might also place a hard inquiry on your account if you've requested a credit line inquiry.
Unlike soft inquiries, a hard inquiry could impact your credit score but there are variables that may cause the effects to be minimal. The credit reporting bureaus don't always consider student loan applications, car loans, and home mortgage inquiries and these may be removed from your credit report after a short period of time.
How much does a hard inquiry affect credit score?
The effects to your credit score can vary, as some reporting agencies only factor in credit inquiries made within the past 12 months, even though they can stay on your credit report for two years.
How long do hard inquiries stay on a credit report?
Hard inquiries typically stay on your credit report for two years but some credit reporting bureaus may not factor it into your score after a year. You may also find that some credit scoring companies only consider hard inquiries from the past twelve months.
Are you comparing rates for auto loans, credit cards or more? When hard inquiries are pulled during a short period amount of time, credit reporting agencies generally recognize this as one event.
Unlike a soft inquiry, a hard inquiry should not be performed without your consent. If you've noticed a recent hard inquiry that you did not authorize, you can reach out to your credit reporting bureau. Once you contact them, you can find out more information on how to file a report and start the process of removing that inquiry from your report.
How many credit checks are too many?
Credit reporting agencies will often count several hard inquiries placed in a short period of time as one event. However, if you consistently have hard inquiries on your report and a low credit score, you may be viewed as a risky lender to credit card companies or loan servicers.
If you have a good credit score, the effects on your score could be minimal, especially if you've been keeping your balances low. But if you have a poor credit score and a high amount of unpaid balances, those credit inquiries may lead to application rejections and an even lower credit score.
To minimize the impact of opening up a new card account, try lowering your current debt first, to help bolster your credit score ahead of your application.
How does applying for a credit card affect your credit score?
The bottom line? If you have a good credit score, a hard inquiry is less likely to negatively impact your credit score.
But a poor credit score is more likely to be affected by multiple hard inquiries, which can signal to creditors that you are a high-risk applicant.
By monitoring your credit report, you can keep an eye on improvements and keep track of when inquiries are removed. If you're currently shopping around for a credit card, be on the lookout for offers you pre-qualify for, lessening the chance of a declined application.