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Hard Inquiry vs. Soft Inquiry

Hard Inquiry vs. Soft Inquiry

Hard Inquiry vs. Soft Inquiry

An inquiry is simply a record that someone has looked at your credit report in which they fall into two categories: soft and hard. Please don’t play around with your inquiries because they can make your scores decrease.

Soft Inquiries

Soft inquiries are only shown to you on your personal credit report and don’t affect credit scores in any way.

Soft inquiries on your credit report are only visible to you, except: (1) insurance companies may be able to see other insurance company inquiries; and (2) inquiries by debt settlement companies you have authorized to access your report may be shared with your current creditors. These inquiries have no effect on your credit score as they are never considered as a factor in credit scoring models. Soft inquiries are not disputable but are available for reference.

Soft inquiries occur when you request your own credit report when you receive a pre-screened or pre-approved credit card offer or insurance quote, when a lender with whom you already do business does an account review, or for employment verification and background checks.

It’s not uncommon to see multiple soft inquiries in a person’s credit report and if you are not familiar with the name of a company that you see listed in this section, it is likely the result of a pre-approved offer or a company that is doing business under a different name.

Hard Inquiries

Hard inquiries occur when you apply for credit or other goods or services. By applying, you authorize someone else, such as a lender or credit card issuer, to review your credit report and potential creditors do this to weigh the risk of extending credit to you. The most common hard inquiries occur when you apply for a mortgage, auto loan, student loan, personal / business loan, or a credit card and according to FICO, a hard inquiry will typically only result in a 5-10-point drop in your credit scores.

Hard inquiries remain on your credit report for two years, but usually only impact your credit scores for a few months. Typically, the impact of a hard inquiry will drop off dramatically after a month or two because there will either be a new account entry, which then becomes the key risk indicator, or there is no new account, which means the inquiry doesn’t represent any risk.

Although too many inquiries within a short period of time can impact credit scores, this is not the case when shopping around for the best rate on a car loan or mortgage. Most credit scoring models are designed to count multiple inquiries made within a certain time frame — usually two weeks — as only one inquiry for purposes of calculating the credit score.

For example, when you apply for a car loan, you or the dealership might contact five competing lenders and all five individual inquires will be part included in your credit report, but they should only be counted as one hard inquiry by credit scores. In fact, the newest credit scoring models may entirely exclude inquiries for auto loans or mortgages. Errors do happen and if you see an awkward inquiry on your reports  please dispute it( them).



Getting a new cell phone, changing your cell phone carrier; connecting utilities such as electricity, natural gas, or cable television, switching to a new utility provider, opening a new bank account, opening a trading or retirement account with a broker, signing a lease to rent an apartment, applying for a job and going through a divorce could cause a hard inquiry, so again be mindful when running your credit  several  times. Even though most of these entities do not report payments to a credit reporting bureau they still may do a hard inquiry on you before they provide you with the desired goods or services.

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