What Is the Difference Between a Hard and Soft Credit Inquiry?

A credit inquiry happens when a lender (or another authorized party) performs a credit check to analyze your creditworthiness and help them make their lending decision. These types of inquiries are known as “hard,” and others are called “soft.”

Because the inquiry is noted on your credit history, the main difference between the two is how each can affect your credit scores. A hard credit pull can drop your score by a few points, while a soft pull has little impact.

What Is a Hard Inquiry?

Hard credit inquiries typically happen when you put in credit card, loan, or mortgage applications, and they usually require your authorization. 

Even though a hard inquiry can drop your score by five to eight points, it is unlikely to play a significant role in whether you get approved for a loan or a new business card. Hard credit pulls usually stay on your credit report for two years; however, the credit score damage usually disappears or decreases before this happens.

The harm is negligible at one or two hard credit pulls. Though you may want to reconsider if you’re planning on applying for a handful of business cards in the span of a few months, or worse, all in the same time frame. Consider spreading out your business loan or credit card applications.

Several hard credit pulls in a short period could cause credit card issuers and lenders to regard you and your business as a higher credit risk. It suggests that you may be getting ready to pick up a lot more debt or that you are short on cash. You likely won’t receive a hard query if you are looking to get pre-qualified for a loan or line of credit.

Examples of Hard Credit Inquiries

A hard credit inquiry becomes part of your credit history, and anyone who pulls your credit will be able to view it. Though the Federal Trade Commission (FTC) limits who can pull your consumer credit score under the Fair Credit Reporting Act

According to Forbes, companies can perform a hard credit inquiry for collection agency skip tracing, credit limit increase requests, and applications for:

  • Lines of credit 
  • Homes or apartments
  • Business loans
  • Credit cards
  • Utility set-ups
  • A personal loan
  • A mortgage
  • Private student loans
  • Auto loans

What Is a Soft Inquiry?

Soft inquiries, credit checks, or pulls take place when a company or individual (or you) checks your credit report as part of a background check. Items listed on a soft credit check are a lot of what you would see if you looked at your own credit report:

  • Payment history
  • Credit accounts
  • Potential collections accounts
  • Lines of credit
  • Loan accounts

Soft pulls won’t impact your credit scores and, depending on the credit bureau, may or may not be recorded on your credit report. 

When lenders check your report, your soft credit inquiries won’t appear. They are only seen on consumer disclosures which are credit reports that you personally request.

Examples of Soft Credit Inquiries

Soft credit pulls can happen when a business or personal card issuer pulls your credit history without your authorization. In fact, soft inquiries are run on your credit all the time for:

  • Credit checks that you perform.
  • Pre-approved credit offers.
  • Quotes from insurance companies.
  • Account reviews performed by current creditors.
  • Background check or verification for potential employers
  • Background checks performed by housing landlords.

There are other credit check types that could appear as a soft or hard type of inquiry. For instance, internet, cable, cell phone, and utility providers will likely check your credit. 

If you are concerned about how your credit check will be classified, talk to your financial institution or credit card issuer about whether it will be done as a soft or hard pull.

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