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Soft vs Hard Credit Inquiries: What’s the Difference?

Soft vs Hard Credit Inquiries: What’s the Difference?

Jenius Bank Team2/20/2024 • Updated 4/4/2024
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Understanding the difference between soft and hard credit inquiries may make managing your credit score easier.

When you apply for a new credit card, loan, or other type of financing, your lender checks your credit report and credit score. Doing so helps them understand if you’re a responsible borrower and guides their lending decision.

This credit check is known as a credit inquiry or a credit pull, and there are two main types that you need to know about: soft inquiries and hard inquiries. Before you apply for a loan or credit card, it’s helpful to know how they work.

Key Takeaways

  • Hard credit checks occur when you apply for a loan or new line of credit, and they stay on your credit report for two years.

  • Soft credit inquiries happen when lenders review who is eligible for certain offers or when certain entities check your credit score.

  • Soft credit checks don’t impact your credit score while hard credit checks may cause your score to drop.

What Is a Soft Inquiry?

A soft inquiry is a more informal credit check that allows lenders to review your credit and determine if you’re eligible for certain offers, such as a pre-approval opportunity or credit limit increase. These inquiries won’t impact your credit score and aren’t visible on your credit report to anyone except you.

Lenders aren’t the only ones who may perform soft credit checks. Landlords, prospective employers, insurance companies, and utility providers are also able to use soft credit checks, but they typically need your permission to do so.1

You also trigger a soft credit inquiry when checking your own credit score or credit report or by researching lending offers to review your rate options.2

What Is a Hard Inquiry?

A hard inquiry or hard credit check happens when you apply for a loan or line of credit and the lender checks your credit score and credit report. This is an essential step in getting approved for a loan or credit card and the check shows up on your credit report.

Hard inquiries only occur when you apply for a credit card, a personal loan, mortgage, auto loan, or other type of financing, and lenders need your permission to run them. When applying for financing, you’re giving permission for the lender to run a hard check.

Hard inquiries stay on your credit report for up to two years and may cause a temporary drop to your credit score, but most borrowers see their scores recover in a matter of months. That said, if you apply for multiple loans or credit cards in a short period of time, you may see a bigger drop in your score that may take longer to recover from.3

How Do Hard and Soft Inquiries Impact Your Credit Score?

As mentioned earlier, hard credit inquiries stay on your credit report for two years and could cause a temporary dip in your credit score. This is because lenders are viewing your report to make a decision about a loan application. If approved, your total number of accounts and debt are impacted and that may alter your credit score.

Additionally, the more lines of credit or loans that you apply for, the more hard inquiries lenders run. Having multiple hard inquiries close together could cause your score to drop significantly and it may signal that you’re struggling to manage your finances.

Each credit scoring model treats inquiries differently. The FICO model treats multiple inquiries for the same type of loan within a 14-to-45-day period as one inquiry.4 On the other hand, VantageScore treats all credit inquiries, regardless of the credit type, within 14 days of one another as a single inquiry.5

Conversely, soft inquiries won’t impact your credit score, even if you check your credit score multiple times in a row. These soft checks are only visible to you; lenders and any other interested parties won’t be able to see them.6

How to Reduce the Impact of Hard Credit Inquiries

Though you can’t avoid hard inquiries entirely when applying for financing, there are things you could do to reduce the number of inquiries that show up on your credit report.

  • Review Your Report Often: Checking your credit report regularly lets you monitor for unauthorized hard inquiries which could be a sign of identity theft .

  • Dispute Unauthorized Hard Inquiries: If you notice any inquiries that you didn’t authorize, report them to the credit bureaus and dispute them. You may be able to have them removed from your credit report.

  • Use the Grace Period: Lenders expect you to shop around before applying for a loan or credit card and both FICO and VantageScore credit models give you a grace period after you apply for a loan or new credit card. During that period, additional hard inquiries won’t show up on your credit report as long as they fit into the model’s requirements.7

Tips for Minimizing the Number of Credit Inquiries That Happen

Credit inquiries are an essential part of applying for a new loan or line of credit, and while you may not be able to avoid them completely, there are a few ways to keep the number of inquiries to a minimum8.

  • Get Pre-Qualified: Pre-qualifications give you a rough idea of the rates and amounts you may receive if you apply for a loan. Since they only require soft credit checks, they won’t impact your credit score, and you may be able to use this to your advantage as you’re shopping around.

  • Use the Rate-Shopping Window: The grace period offered by FICO and VantageScore lets you apply for loans and credit cards with different lenders without counting more than one hard inquiry on your report. You could use this to your advantage by applying for loans and lines of credit with multiple lenders in this window and choose the lender that offers you the best rate.

  • Limit the Applications You Submit: Outside of the grace period, you experience hard inquiries for every application you submit. Try to limit the number of applications you submit throughout the year.

  • Understand the Type of Check: Before you proceed with a lending process, make sure you understand the type of inquiry that the lender may perform. If lenders are performing soft inquiries, you won’t have to worry about your score taking a hit. But if you’re applying for a new loan or credit card, and lenders are going to perform a hard inquiry, you want to be prepared for a potential hit to your credit score.

Final Thoughts

When you apply for credit or a new loan, lenders check your credit score. Though these hard inquiries may cause your credit score to drop a few points, they shouldn’t keep you from applying if you think a new credit card or personal loan could help you financially.

Take time to research your financing options and determine what may work best for your situation before submitting an application to reduce the number of hard inquiries you subject yourself to.

Financial WellnessBorrowing & Credit