If you apply for a loan or a credit card, the creditor will typically determine your creditworthiness by pulling your credit file. Depending on whether it’s a hard inquiry, also known as a “hard pull,” or a soft inquiry aka or “soft pull,” your credit score may decrease.
But don’t worry! The damage may not be as bad as you think.
What’s the Difference Between a Hard Inquiry and a Soft Inquiry on Your Credit?
In this article, I’m going to go over the difference between a hard inquiry and a soft inquiry on your credit report and how they affect your credit score.
In my research, I’ve sourced information from the major credit bureaus and FICO, which created the consumer credit-scoring model used by most lenders.
Let’s get into what a hard inquiry is then we’ll talk about a soft inquiry.
What Is a Hard Inquiry?
A hard inquiry occurs when a company pulls your credit report in order to determine the risk of offering you a loan or new line of credit. This is a serious inquiry that lenders use in making a decision whether to extend credit to you and on what terms: the length, amount and interest rate. Because of this, hard credit inquiries are recorded on your credit report.
When you request a credit limit increase, it may constitute a hard inquiry or it may not. Here’s what Experian says on the topic: “It depends on the lender and their policy for how they treat that request.”
Some examples of hard inquiries include:
- Mortgage applications
- Credit card applications
- Car loan applications
- Student loan applications
How Much Does a Hard Inquiry Affect Your Credit Score?
“For most people, one additional credit inquiry will take less than five points off their FICO Scores,” it says on FICO’s website.
But here’s the good news: The credit agencies know that you’re shopping around, so successive credit inquiries in a matter of days are typically counted as only a single hard inquiry.
“Multiple hard inquiries within a certain time period for a home or auto loan are generally counted as one inquiry,” it says on Equifax’s website. FICO says the same is true of a student loan.
You may be wondering how long you have before these inquiries begin to ding your credit score more than once.
“For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14-day span,” its website says. “For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO Scores.”
How Long Will a Hard Credit Inquiry Stay on Your Credit Report?
A hard inquiry can stay on your credit report for up to two years, but one year is customary, according to Equifax.
A listener recently asked money expert Clark Howard whether asking for a credit increase would result in a hard pull on their credit file. Here’s Clark’s response:
“I have not seen that this has caused a hard pull on my credit report. But even if it did, I wouldn’t worry about it, especially because the hard inquiry hit is a small enough impact on the credit score.”
So as FICO and Clark indicate, any drop in your credit score from a hard inquiry will typically be minimal and temporary.
What Is a Soft Inquiry?
A soft inquiry typically happens when a company checks your credit file as part of a verification process. For instance, if you’re a job candidate, many potential employers will check your credit as part of their due diligence to authenticate your identity.
Some examples of soft inquiries include:
- Background checks
- Credit card offers
How Much Does a Soft Inquiry Affect Your Credit Score?
A soft inquiry will not affect your credit score and can be done an unlimited number of times.
If you haven’t taken steps to rid your mailbox of junk mail, you may be getting plenty of pre-approved credit card offers.
“If you’ve received a targeted credit card offer in the mail, it was probably a result of a soft pull by a lender,” Experian says on its website.
To sum it up, a hard inquiry or “hard pull” can hurt your credit score. A soft inquiry or “soft pull” won’t hurt your credit score at all.
A single hard pull inquiry could drop your score anywhere from one to five points, according to the FICO.
Clark wants you to take advantage of accessing your credit reports because he’s a big proponent of monitoring your credit — for free.
“No one should ever pay for credit monitoring,” he says. “If you want credit monitoring, do it for free. There are so many places where free services are now available.”
After setting up credit monitoring, Clark advises that you freeze your credit, which stops thieves from establishing new credit in your name even if they are able to obtain your personal information.