What is the difference between hard and soft inquiries in credit report

What is the difference between hard and soft inquiries in credit report

Checking the Credit Report is necessary to manage the finances but it can also affect your Credit Score. When a lender, banker or creditor asks the credit bureaus to pull or check your credit report an inquiry is conducted which can be “Hard Inquiry” and “Soft Inquiry.” People get confused between the two inquiries. As they are both quite similar to each other. However, they still have many differences.

What is hard inquiry?

Hard inquiry is also called as hard pull. When you apply for any kind of loan such as auto loan, home loan, loan against property, personal loan, education loan and credit card, the lender or banker check your credit score as his decision making process. This checking or inquiry appears on your credit report and can shave up to 5 points. You know about the inquiry as your consent is required. In this process the lender or banker can ask from more than one bureau regarding your credit score.

In case if you do not recognize the inquiry that can be the sign of identity theft. It means someone is trying to get credit in your name. You need to be more cautious regarding those inquiries that you don’t recognize.

Few examples of Hard Inquiries are: Credit Card Application, Personal Loan Applications, Auto Loan Applications, Apartment Rental Applications and Mortgage or home loan Applications.

How long does a hard inquiry stay in the Credit Report

A hard inquiry can stay in your credit report for 2 years. However, its impact starts decreasing even before the inquiry is removed from your credit report. As the credit scoring models or lenders focus more on your payments history and credit utilisation ratio. But that doesn’t mean you will apply for too many loans and credit cards. As the lenders will consider you a risky customer who is in a dire need for money and can default the payment in the future.

How does a hard inquiry affect your Credit Score?

Hard inquiry drops or lowers your credit score. Although its negative impacts are temporary and small. For the fact, there is no fixed number of how many hard inquiries can ruin your credit report. But it is a matter of concern for the lenders as too many inquiries add up many new accounts which implies that you are having trouble in payment bills and can default the payment in the future.

Can you dispute Hard inquiries?

If a hard inquiry has been done without your permission you can fix this error in your credit report. Just inform the credit bureau regarding the unauthorised inquiry. You can even call them. But before informing them check all the reports generated by the credit bureaus. If the inquiry is shown in all of them then you just need to inform the creditor. It also be the matter of identity theft.

What is soft inquiry?

Soft Inquiry s also called as soft pulls. Checking your own credit card comes under soft inquiry. In other words, when an individual checks his credit report in order to look his creditworthiness is called soft inquiry. Sometimes, it is done without your consent. The lenders or bankers pull your report in the name of background check to assure that if you qualify for certain credit offers. In case if you receive credit offer in your mail it is possible that credit company has checked your credit report. As they want a responsible customer having a good credit score.

Few examples of soft inquiry are: Employment Verification, Pre- Qualified Credit Card Offers and Pre- Qualified Insurance Quotes and pre-approved loans.

Does soft inquiry affect your Credit Score?

Since soft inquiry is made to see an individual’s creditworthiness it does not affect your credit score unlike hard inquiry. Only you can see the inquiries and not any lender. These inquiries do not create any negative impact and you can make innumerable soft inquiries.  A soft inquiry is when someone checks his own credit score and a company in the position of an employer checks your credit score as part of a background check

How can you minimise the impact Of inquiries in your Credit Report

Since soft inquiries do not harm an individual. Therefore, you need to focus on how can you minimise the impact of hard inquiries.

You can check your credit score for free to assure if any hard inquiries that appear in your credit report are authorized by you or are potential cases of fraud. Everyone has three reports from each of the 3 credit bureaus which are Experian, Equifax and TransUnion CIBIL. Moreover, everyone has a benefit of one free credit report per bureau per year. Go on the site, create an account and answer some questions of identity verification. After that you will be presented with your credit report.

Only apply for credit if you need it. It is important to understand that if you apply for credit otherwise, it would increase your hard inquiries, leading to an impact on your credit score. Due to which the lenders or bankers will consider you a risky customer.

Do not apply for various credit or loan applications at the same time or within a few months. This will make a negative impression on lenders and lower down your credit score.

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