Hard Credit Inquiries vs Soft Credit Inquiries
Credit inquiries are requests made by you or business institutions for your credit report from credit bureaus. These reports provide businesses the information they need to make an informed decision regarding lending activities.
What is credit inquiry?
The credit inquiry is done with your authorization although in some instances, your credit issuer do routine check on your credit history. A credit inquiry pending on the type can derail your credit score. Having a poor credit is bad for business. You may find yourself restricted from doing several financial dealings like securing car loan, mortgage, and so on. It’s very crucial to maintain a favorable credit score. Basically there are two types of credit inquiry: hard credit inquiry and soft credit inquiry.
Hard credit inquiry
Hard inquiries otherwise known as hard pulls are credit inquiries usually authorize by you to check your credit report. Hard pulls are performed usually by money lenders or credit issuers in the event of making any lending decision. This operation has to be authorize by you because there are consequences attached. Hard credit inquiry has an impact on your credit score as it reduces its buoyancy. Hard inquiry lowers your credit score by few points. Some examples of hard inquiries includes:
Applications for mortgages
Applications for credit cards
Applications for car loan
Application for student loan
Soft credit inquiry
Soft inquiries otherwise known as soft pulls are credit inquiries authorize by you to check your credit card report. Soft inquiries on your credit can also be authorized by your prospective employer as part of bureaucratic procedure of vetting potential employees. Also, your credit card issuer can also check your credit history for certain reasons. Soft credit inquiry doesn’t have any negative impact on your credit scores. You can authorize it to keep up with your credit report history and it not going to reflect on your report card. Some examples of soft inquiries includes:
Background check by prospective employer
Routine check by your credit card issuer
Pre-qualified insurance quotes
Difference between hard credit inquiry and soft credit inquiry
Although both hard and soft inquiries are credit inquiries but there are clear cut differences between the two. For starters, hard inquiry can’t be authorize without your full fledged consent but soft inquiry can be done without your authorization as it doesn’t carry any harmful effect on your credit score. The key difference between hard inquiry and soft inquiry is the negative effect factor. When you authorize a hard inquiry on your credit, your credit card score will be deducted. But when you make a soft inquiry, or an institution does, there will no point deduction on your credit scores.
Hard inquiry dispute
Any hard inquiry on your credit report must be done with your full authorization but there may be instance when such inquiry might be done without your blessings. Such incidence may likely be theft of identity. If you find yourself a victim of any identity theft, you are obliged by law to report such incidence to the appropriate authority for full investigation. If it turns out you didn’t have any hand in it, your credit score points will be restored. This is why it is highly recommended for you to be checking your credit report from time to time.
What if I make several inquiries for loan within short period interval?
Hard inquiry may cost you up to five points of your credit scores. What if you make several loan inquiries to different organizations within short time interval? Several inquiries for same type of loan within short time don’t carry multiple deductions. Your inquiry will judge as a single inquiry. It’s normal to find yourself in such position owing to the fact you might be looking for the best deal possible.
How long does a hard inquiry stay on my report?
Any hard inquiry on your credit can stay on your credit report for up to two years but the effect on it only last a single year.
Maintaining healthy credit score report is crucial for all your financial dealings. When your score is poor, your chance of encountering bumps whenever you try making any financial dealing is common. Sometimes you find yourself taking hard knocks on your scores and still bagging rejection. That’s double lost for you. Why incur a needless hard inquiry on your credit when you are not sure your request will be granted?
The best way to go about handling your credit report is to take time and build it properly. With a very good score, your chance of getting rejected is slim. Also, avoid needless hard inquiries on your credit, it scares potential lenders from doing any deal with you.
Before authorizing any hard inquiry, do your homework well. Assess your chances of getting approved for any loan before taking the giant step toward applying it. it will enable you avoid unnecessary hard pulls.
|Thomas Moore is a proud American with a Bachelors Degree in Business Administration from the University of San Diego. He has been in the financial industry for many years holding numerous licenses in multiple states. He currently helps operate cashkingco.com and is our resident expert on all things finance and a great writer. Thomas is also an avid outdoor enthusiast that loves fly fishing streams in the Western United States. LinkedIn Profile|