Hard Inquiries vs Soft Inquiries: How Are They Different?

Written by Kim PinnelliUpdated: 20th Jan 2021
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Hard inquiries vs soft inquiries: Credit scores, credit reports, hard and soft inquiries can all make your head spin.

What’s good, and what’s not? What is a hard inquiry, and what is a soft inquiry and aren’t they all bad?

In this article, we help you make heads or tails out of all things credit inquiries so you too can be an expert on credit scores.

Keep reading to find out the key differences between hard inquiries and soft inquiries.

Hard Inquiries

Hard inquiries occur when a lender pulls your credit intending to lend you money. They may lower your credit score slightly, and they are a red flag for future lenders if there are too many of them.

Hard inquiries aren’t necessarily bad, though. They are necessary otherwise you’d never have new credit.

Knowing when to apply for credit, and how to manage hard inquiries ensures your credit score isn’t overly affected by this necessary credit action.

When Does a Hard Inquiry Happen?

Hard inquiries only happen when you actively apply for new credit. You must provide the lender with approval to pull your credit, which is part of the application process.

After a lender pulls your credit to make a lending decision, the credit bureau (the one the lender pulled the report from) reports the inquiry.

For example, if the lender pulls your TransUnion credit report, the inquiry will show on your TransUnion report.

If another lender pulls your TransUnion report, they’ll see it, but not if they pull your Equifax or Experian credit report.

Examples of Hard Inquiries

Hard inquiries occur only after you apply for new credit. If you complete an application for a credit card, student loan, personal loan, auto loan, or mortgage, the inquiry will show on your credit report.

Every time someone pulls your credit with the intent to lend you money, it’s an inquiry.

How Hard Inquiries Affect Your Credit Score

Hard inquiries affect your credit score, but not as much as you think.

Typically, your score drops five points for each inquiry. That’s not a lot in the grand scheme of things. If you have a 720-credit score, for example, a 715 score isn’t much different.

Lenders will treat you the same.

If you have multiple inquiries from different types of lenders, though, it could harm your credit score. Four inquiries, for example, could drop your score as much as 20 points.

That could hurt, especially if your score is barely bordering an approval.

There’s a hard inquiry hack when it comes to your credit score, though.

If you apply for the same type of credit within 30 days, it only counts as one inquiry. Here’s an example.

You are in the market for a car loan. You apply for a loan with your bank but don’t love the interest rate they offer so you apply with a few other lenders.

You compare the offers from the different banks to make your decision. This is a smart way to get the best rate, but what about your credit score?

If you apply within 30 days, the credit bureau recognizes the need to rate shop and only hits you for one inquiry – five points.

Now, if you shopped for the different rates over a few months, you would get hit for each inquiry, which could potentially lower your credit score.

Here’s a tip. Don’t apply for a loan until you’re ready to comparison shop. Keep the inquiries to a minimum, and you won’t feel the effects on your credit score.

Next Steps: How to Remove a Hard Inquiry from Your Credit Report 

Soft Inquiries

Soft inquiries are also inquiries, but they don’t affect your credit score, here’s why.

A soft inquiry ISN’T an intent to lend you money. Soft inquiries are just a quick look at your credit to see if you ‘might’ qualify for a loan.

Financial institutions, insurance companies, and even employers use soft inquiries. They don’t need your approval to run the inquiry because it doesn’t hurt your credit score.

When Does a Soft Inquiry Happen?

Soft inquiries happen when you pull your credit (to check your score) or when a credit card company sends you a pre-approved offer.

The ‘pre-approval’ happens because the credit card company looked at your credit with a soft inquiry.

Examples of Soft Inquiries

The most common example of soft inquiries is when you pull your own credit. Other examples include:

  • Credit card pre-approvals
  • Potential employers who want to check your financial worthiness
  • Insurance companies checking your credit to determine your insurance premiums

None of these examples results in new credit, which is why they are a ‘soft’ inquiry. Future lenders don’t need to know about them because you didn’t apply for new credit, there’s nothing for other lenders to worry about.

How Soft Inquiries Impact Your Credit Score

Here’s the best news.

Soft inquiries DON’T affect your credit score. You can check your credit on sites like Experian, credit card companies can send you pre-approvals based on the soft inquiries, and employers can check your credit for financial responsibility, and your credit score will remain unaffected.

Key Differences Between Hard and Soft Inquiries

Soft and hard inquiries are both inquiries – someone is looking into your credit. Still, the key differences determine how they affect your credit score and financial future.

Soft Credit Check vs Hard Credit Check

A soft credit check occurs when you check your own credit OR when a company checks it but without your approval and without the intent to lend.

A hard credit check occurs AFTER you apply for new credit. You approve the financial institution to pull your credit with the hopes of making a loan out of it.

A soft credit check doesn’t hurt your credit score. It doesn’t even show up on your credit report if lenders pull your credit. The only person who sees your soft inquiries are you when you pull your credit.

A hard inquiry hurts your credit score. It’s not a lot, but it’s worth understanding. One inquiry is usually worth 5 points.

That may not seem like much, but if you’re on the cusp of approval and denial, it could make all the difference.

Hard Inquires vs Soft Inquiries: What is Worse?

Neither hard nor soft inquiries are ‘bad’, but hard inquiries are definitely worse. Before you allow a lender to pull your credit, think about it.

Do you want the credit, or are you applying ‘just because’? Hard inquiries hurt your credit score, soft inquiries don’t.

How to Minimize the Impact of Credit Inquiries

Credit inquiries aren’t as bad as they sound. As long as you don’t apply for every opportunity that crosses your path, they shouldn’t hurt your chances of getting new credit.

Remember, hard inquiries stay on your credit report for 2 years, so lenders can see for a while the credit you applied for.

Only apply for the necessary credit to minimize the effects on your score and your credit history overall.

Pro Tips: Managing Credit Inquiries

Hard credit inquiries hurt your credit score, so it’s important to be smart about it. Try:

1. Only applying for credit when you need it.

Don’t apply for a credit card just because you received a pre-approval in the mail and it looks like a good one. Stop and think, were you thinking about getting a new credit card?

Do you need one?

It’s tempting to apply for anything that comes your way but don’t.

2. Apply for new loans (mortgage, car loans, student loans, etc.) only when you’re ready to shop around.

Don’t apply for a loan and then a month later decide you don’t like that one and apply for more. Consolidate it into 30 days to minimize the effect on your credit score.

3. Check your credit report and report any inquiries that don’t belong to you.

Whether you didn’t authorize the inquiry or you think it’s identity theft, dispute it with the reporting credit bureau immediately.

Each bureau has a page online for you to dispute it or for better results, send the dispute in writing via certified mail with return receipt requested.

This gives you official proof that you disputed the inquiry should you need it. Credit repair companies can help you remove hard inquiries from your credit report.

This is worth considering if you are a victim of identity theftor if you made a mistake and applied for credit over the course of a few months.

Wrapping Up: Hard Inquiries vs Soft Inquiries

Hard inquiries hurt your credit (barely) and soft inquiries don’t. That should not make you afraid to apply for new credit but be mindful when you apply.

Don’t apply just because you can – make sure there is a purpose and that you have a plan.

This minimizes the effects you have on your credit score and report. It shows future lenders you are financially responsible and that you don’t desperately apply for any credit that comes your way.

Expert Credit Resources: 

Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.