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

There are two types of credit inquiries that lenders look at when you apply for a loan: hard inquiries and soft inquiries. What’s the difference? And which one is bad? Here’s everything you need to know about hard inquiries vs soft inquiries, including what they mean for your credit score.

1. What is a hard inquiry

A hard inquiry is a type of credit inquiry that is initiated by a lender when you apply for a loan, a Credit Card. This type of inquiry can impact your credit score, as it shows that you are actively seeking new credit.

Your permission is required for Hard inquiries, which is why they are also called “authorized inquiries.” Hard inquiries are recorded on your credit report and remain there for two years.

Here is the Example of Hard Inquiries:

  • You apply for a new credit card.
  • You’re approved for a new car loan.
  • You apply for a mortgage.
  • Increase in credit limit( Not mandatory).
  • Applications for lines of credit
  • New utility applications
  • Apartment rental applications
  • Collection agency skip tracing

2. What is a Soft Inquiry

A soft inquiry is defined as a type of credit check that does not affect one’s credit score. Soft inquiries can occur when an individual checks their own credit report, when a business checks an individual’s credit report to extend a ‘pre-approved’ offer of credit, or when a business checks an individual’s credit report to make a non-credit related decision (such as employment).

While soft inquiries do not hurt one’s credit score, multiple soft inquiries in a short period may be seen as a red flag by lenders and could result in a higher interest rate being offered. As such, it is generally advisable to avoid checking one’s credit report too frequently or authorizing businesses to pull one’s credit report unnecessarily.

Here is the Example of Soft Inquiry:

  • You check your own credit score.
  • A business checks your credit to offer you a “pre-approved” credit card.
  • A landlord checks your credit before approving your rental application.
  • Your current creditors check your credit to offer you a higher credit limit.
  • years but only impact your score for the first.
  • Checking your rate for a personal loan through Upgrade
  • Account reviews by current creditors
  • Employment applications
  • Insurance applications

3. What is the difference between the two.

When you apply for credit, the lender will check your credit report as part of their decision-making process. This is called a hard inquiry, and it can temporarily lower your credit score.

If you’re shopping around for a loan or credit card, you may see multiple hard inquiries on your report within a short period. While multiple inquiries can reduce your score, they’ll only have a small impact if they’re all made within a short period, such as 14 days.

In contrast, a soft inquiry occurs when you or someone else checks your report as part of a routine background check. Soft inquiries don’t have an impact on your score, and you won’t even see them unless you check your own report.

4. Which one is bad?

Neither a hard inquiry nor a soft inquiry is necessarily bad. But too many hard inquiries on your report can signal to lenders that you’re desperate for credit or maybe taking on too much debt. That could make it harder for you to get a loan or credit card with favorable terms in the future.

3. How do inquiries affect your credit score.

Inquiries are recorded on your credit report when someone accesses it to check your creditworthiness. An inquiry stays on your report for two years and can slightly hurt your credit score.

Each hard inquiry also subtracts a few points from your score, although the impact of multiple inquiries is usually insignificant compared to the other factors in your credit history.

Still, if you’re trying to improve your credit score, it’s best to avoid applying for new credit cards or loans until your score has recovered. And if you’re shopping around for a loan, make sure that all of your inquiries are made within 30 days, as multiple inquiries made within a short time frame are treated as a single inquiry. By taking these steps, you can minimize the impact of inquiries on your credit score.

4. How long do hard inquiries stay on your credit report?

Hard inquiries stay on your credit report for 2 years from the date of the inquiry. After that, they’ll be automatically removed.

However, hard inquiries can only be removed if they’re deemed to be unfair, inaccurate, or misleading. If you think a hard inquiry is inaccurate, you can file a dispute with the credit bureau.

If the dispute is successful, the hard inquiry will be removed from your report. Hard inquiries can have a negative impact on your credit score, so it’s important to shop around for loans and credit cards before you apply.

By understanding how hard inquiries work, you can avoid having too many of them and maintain a healthy credit score.

5. How Many Points Will a Hard Inquiry Cost You?

A hard inquiry will cost you a few points from your credit score. While this impact is typically small, it’s best to avoid applying for new credit if you’re trying to improve your score.

According to FICO, a hard inquiry can cost you between 2 and 5 points from your score. This impact is usually temporary, and your score will rebound after a few months if you keep up with your payments and don’t add any new inquiries during that time.

6. How to avoid getting too many inquiries on your credit report

Your credit report is a vital piece of your financial puzzle. It’s a record of your borrowing and repayment history that lenders use to determine your creditworthiness. A high inquiry rate can ding your score and make it harder to get approved for loans and credit cards. So how can you avoid getting too many inquiries on your credit report?

Here are the best ways to avoid too many inquiries:

# A. Shop around for loans and credit cards before you apply.

When you’re shopping for a loan or a credit card, it’s important to compare rates and terms from different lenders. By applying for loans and credit cards from multiple sources, you can minimize the impact of hard inquiries on your credit score.

Remember, each inquiry subtracts a few points from your score, so it’s best to avoid applying for new credit until you’ve found the best deal.

# B. Keep your applications for new credit cards and loans to a minimum.

Every time you apply for a new credit card or loan, the lender will pull your credit report. This process, known as a hard inquiry, can ding your score. So it’s important to keep your applications for new credit to a minimum.

If you’re shopping around for a loan, make sure that all of your inquiries are made within 30 days. By doing so, you can minimize the impact of multiple inquiries on your score.

# C. Be Watchful for surprising hard inquiries.

If you’re not careful, you may end up with a few surprise hard inquiries on your credit report. These inquiries can happen when you least expect it, and they can have a negative impact on your credit score.

So how can you avoid getting hard inquiries without having to keep track of every credit card application and loan inquiry? The best way to avoid hard inquiries is to use a credit monitoring service.

Credit monitoring services like Credit Karma and Credit Sesame will track your credit report for you and alert you whenever there’s a new inquiry. This way, you can stay on top of your credit report and avoid any surprises.

With a little bit of vigilance, you can avoid getting too many inquiries on your credit report.

# D.Try to take advantage of soft inquiries for rate shopping

Another way to reduce the impact of hard inquiries on your credit score is to take advantage of soft inquiries. A soft inquiry is a gentle inquiry that doesn’t affect your credit score. This type of inquiry can be used when you’re rate shopping for loans and credit cards.

By taking advantage of soft inquiries, you can minimize the impact of hard inquiries on your credit score.

# E.File a dispute if you think a hard inquiry is inaccurate.

If you think that a hard inquiry is inaccurate, you can file a dispute with the credit bureau. By doing so, you can get the inquiry removed from your credit report.

To file a dispute, you’ll need to contact the credit bureau and provide proof that the inquiry is inaccurate. The credit bureau will then investigate the inquiry and determine whether or not to remove it from your credit report.

By taking these steps, you can avoid getting too many inquiries on your credit report. By following these tips, you can keep your inquiry rate low and your credit score high.

7. What to do if you have too many inquiries on your credit report.

If you have too many inquiries on your credit report, you can take steps to minimize the impact on your credit score.

The best way to deal with multiple inquiries is to shop around for loans and credit cards before you apply. This will reduce the impact of hard inquiries on your score.

You can also try to take advantage of soft inquiries for rate shopping. This will minimize the impact of multiple inquiries on your score.

If you think that a hard inquiry is inaccurate, you can file a dispute with the credit bureau. By doing so, you can get the inquiry removed from your credit report.

8. How to get inquiries removed from your credit report

Here are the steps you need to take to get an inquiry removed from your credit report:

1. dispute the inquiry with the credit bureau

2. provide proof that the inquiry is inaccurate

3. the credit bureau will investigate and determine whether or not to remove the inquiry

4. if the inquiry is removed, your credit score will improve

9. Conclusion – summing it all up.

So, to sum it all up: by following these tips, you can avoid getting too many inquiries on your credit report. This will help keep your credit score high and minimize the impact of hard inquiries on your credit history. By being vigilant and using a credit monitoring service, you can stay on top of your credit health and protect your score from unnecessary inquiries.

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