What is the difference between a hard and soft inquiry of your credit score? Learn more here.
More often than not, when you apply for any sort of credit or financing, lenders will conduct a credit check, among other inquiries into your credit history and more. There are two different types of inquiries: hard and soft. The reality is that lenders typically conduct a hard inquiry when they look at the official credit report. Ultimately, they use this information to properly inspect just how you’ve used and handled all your finances in the past — to better help them understand your financial habits overall. That being said, when you check your own credit report — that is quite commonly referred to as a soft inquiry. Here are some easy ways to better understand the differences and nuances associated with hard versus soft inquiries.
Understanding A Hard Inquiry
Hard inquiries tend to involve a financial institution like a lender or credit card issuer checking your overall credit to make an informed lending decision. When you apply for a mortgage or credit card, the financial institution will almost always conduct a hard inquiry regarding your financial situation. Conducting a hard inquiry might decrease your overall credit score by a couple of points — but usually isn’t dramatic, generally speaking. Ultimately, having a credit check report once in a while won’t affect your overall credit score too significantly — but having too many hard inquiries into your financial situation could lead to more drastic issues down the line.
Too Many Hard Inquiries?
Understanding hard inquiries will likely cause you to wonder how many hard inquiries are too many. The ultimate effect of a hard inquiry is typically a reduction in your credit score. Therefore, making sure you don’t apply for too many loans or credit cards simultaneously can help reduce the decrease in your credit score overall. Ultimately, having a lot of hard inquiries within a very short time frame is a surefire way to decrease your credit score rapidly.
Understanding A Soft Inquiry
When it comes to a soft inquiry, this usually happens when an individual checks their own credit score. Many companies will often conduct background checks prior to hiring a prospective employee. They’ll usually look into your credit history by pulling a credit check as a part of the background check, which traditionally is considered a soft inquiry.
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