While you may have heard the terms “hard and soft inquiries” used often when it comes to applying for credit, few people know what they really mean and how they impact credit scores. Hard and soft credit inquiries are both requests to view your credit by retailers, financial institutions, and other lenders.
It’s not just lenders who are concerned about your credit history. Prospective employers, landlords, and even your auto insurance company might want to know what’s in your credit report these days.
A soft credit inquiry is a more routine check that can be done without your permission. A common example of a soft inquiry is when a lender you’re currently doing business with checks your credit to make sure you’re still creditworthy. You can also trigger a soft inquiry yourself if you check your own credit. Employment background screening is also another reason of a soft inquiry.
A hard credit inquiry occurs when a potential lender examines your credit report and uses that information to decide whether to extend an offer for credit. For instance, if you apply for a home mortgage or a car loan, your lender will make a hard inquiry of your credit to help determine if you qualify for the loan.
A hard inquiry happens when your credit is reviewed because you’ve applied for a credit card, mortgage, car loan, or other financing. Hard inquiries indicate that you might be about to take on more debt and they may negatively affect your credit scores.