Understanding the Difference Between Soft and Hard Credit Inquiries

When it comes to managing your financial health, your credit report plays a central role. Whether you're applying for a loan, renting an apartment, or simply keeping tabs on your credit score, chances are you've encountered the term credit inquiry. But what exactly does that mean? 

A credit inquiry is a request to check your credit report and acts as a snapshot of your financial reliability. This request might come from a lender, a landlord, a utility company, or even you. These inquiries are recorded by the major credit bureaus and, depending on the type, can have an impact on your credit score. However, not all credit inquiries are created equal. 

There are two main types of credit inquiries: soft inquiries and hard inquiries. Each serves a different purpose and has a different impact on your credit score. Understanding the difference between the two can help you make smarter financial decisions, avoid unnecessary dings to your credit, and feel more confident navigating situations where your credit report might be reviewed. 

What Is a Hard Credit Inquiry? 

A hard inquiry, or hard pull, happens when a lender checks your credit report as part of a decision-making process for a credit card, loan, or line of credit.  

Here are some situations when you can expect a hard inquiry: 

• Applying for a new credit card: Each application will trigger a hard pull. 

• Requesting a credit limit increase: Some issuers perform a hard inquiry to assess your eligibility. 

• Leasing or buying a car: Dealerships and lenders will check your credit before approving financing. 

• Applying for a mortgage: Lenders will perform a hard pull during the application process and possibly again before closing. 

• Renting an apartment: Some landlords or property managers may run a hard inquiry as part of the tenant screening process. 

• Applying for a student loan: Your loan application will trigger a hard inquiry. 

You must give consent to anyone to run a hard inquiry. If someone runs a hard inquiry without your permission, that’s against the law. 

If you’re unsure whether an action will result in a hard inquiry, don’t hesitate to ask the lender or service provider in advance. 

How Much Do Hard Inquiries Affect Your Score? 

Hard inquiries can impact your credit score, though usually only by a few points. For example, if your score is 720, a single hard inquiry might bring it down to 717. It’s not a huge drop, but something to be mindful of if you're applying for a major loan. 

A hard inquiry signals to credit scoring models that you’re actively seeking new credit, which could indicate a higher level of risk. Because of this, it’s wise to limit hard inquiries and prioritize soft ones when you can. It’s also a smart idea to only apply for one credit card at a time, since opening multiple accounts will trigger several hard inquiries, potentially damaging your credit score. 

The impact of a hard inquiry varies depending on your overall credit profile. For most people, a single hard inquiry might lower their score by less than five points. However, multiple hard inquiries in a short period can have a bigger impact if they happen close together. 

Don’t panic, though—the impact is typically short-lived. Most credit scoring models stop factoring in hard inquiries after 12 months, even though they remain on your credit report for up to two years. 

Credit scoring systems are designed to be fair, which works in your favor. For example, if you’re rate-shopping for a mortgage, auto loan, or student loan, multiple inquiries for the same type of loan within 14-45 days are typically treated as a single inquiry. This allows you to compare offers without being penalized. 

What Is a Soft Credit Inquiry? 

A soft inquiry, also known as a soft pull, occurs when your credit report is checked, but not as part of a formal credit application. These inquiries are typically used for background checks, pre-approvals, or personal credit monitoring. Like hard inquiries, soft inquiries stay on your credit report for two years, but they’re only visible to you. 

Soft inquiries are more common than you might think. Here are a few situations where you can expect a soft inquiry: 

• You check your own credit through a service like Experian or Credit Karma. Credit monitoring services can be a great way to stay on top of your credit activity and catch any unexpected changes or suspicious activity early. 

• A lender pre-approves you for a credit card or loan offer. 

• Your current credit card issuer reviews your account to determine if you qualify for a better rate or product. 

• An employer runs a background check as part of a job application process. 

These inquiries are harmless to your credit score. They’re visible only to you and not to potential lenders reviewing your credit report. So, if you’re shopping around for the best loan rates or using a credit monitoring service, you can rest easy knowing your score won’t take a hit.  

Why the Difference Matters 

Understanding the distinction between soft and hard inquiries is important for managing your credit health. Here’s how: 

• Planning ahead: If you’re preparing to apply for a major loan, like a mortgage, it’s wise to avoid unnecessary hard inquiries in the months leading up to your application. 

• Monitoring your credit: Regularly checking your credit score through soft inquiries helps you stay informed without affecting your score. 

• Avoiding surprises: Knowing which actions trigger hard inquiries can help you make more informed financial decisions. 

H2: Be Informed, Not Intimidated 

At the end of the day, credit inquiries are a natural part of managing your financial life. While hard inquiries can have a temporary impact on your credit score, they’re nothing to fear, especially when you’re making smart, intentional financial decisions. 

For perspective, credit inquiries only make up 10% of your total credit score. Your payment history and how much of your available credit you’re using (also known as credit utilization) have a much bigger impact on your score than inquiries do. 

Here are some final tips to keep in mind when managing credit inquiries: 

• Check your credit regularly using soft inquiries to stay informed. If you see a hard inquiry on your credit report that you didn’t authorize, you have the right to dispute it. 

• Be strategic about when and how often you apply for new credit. If you opened a new credit card last month, do you really need to apply for another? 

• Ask questions before applying for loans, insurance, or jobs. Know in advance whether a hard inquiry will be involved. 

• Don’t let the fear of a hard inquiry stop you from pursuing the credit you need. A few points off your score is often worth it when you’re making a move that supports your financial goals. 

If you ever have any questions, we’re here to help. At WithU Loans, we’re with you every step of the way, offering clear guidance and support you can count on.