Financial Education

Hard Vs. Soft Credit Inquiries and How They Affect Your Credit Score

Whenever you apply for credit, whether it be for a mortgage, a car loan, or a credit card, the lender will pull your credit. However, not all credit pulls are the same. You may have heard the terms soft pull, and hard pull but not really understood how they differ, or how each affects your actual credit score.

Soft Credit Inquiry

The most important attribute of a soft credit inquiry, or soft credit pull, is your credit score is unaffected. Soft inquiries can be done without your consent, and are most commonly used by companies as part of their prequalifying process for those credit card and line of credit offers you get in the mail. Soft credit inquiries are used in cases when you are not actually applying for credit. A soft credit inquiry is also used if you request your own credit report.

Hard Credit Inquiry

A hard credit inquiry, or hard credit pull, is performed when you are actually applying for credit. A hard credit pull requires your consent. Some common scenarios when a hard pull will occur is when you apply for a mortgage, a car loan, or even a store credit card.

How Does A Hard Credit Inquiry Affect My Credit Score?

A hard credit inquiry can decrease your FICO score by about 5 points for the next 6 months. For this reason, you want to try to limit the number of hard credit inquiries, as your FICO score can impact whether you get the very best rates when you apply for credit. What rate is offered can result in thousands of dollars in interest when considering long-term credit like a car loan, or a mortgage.

When it comes to your credit, it’s important to know what actions can affect your credit score and how much. Soft and hard credit inquiries are both used to get information about a person’s credit score but have very different uses and impacts. Knowing the difference can help consumers keep their credit in optimum shape, giving them the best score possible when they really need to apply for credit.

How about you, Clever Friends, did you know the difference between hard and soft credit inquiries? Did you know how much a hard credit inquiry affects your credit score?