Sep 26 • 3 mins read
Hard Inquiry and Soft Inquiry: How Each Impacts Your Credit Score
When you apply for any type of credit, the potential lender or creditor asks the credit bureau to pull out your credit report. This inquiry gets registered in your credit history.
Credit score inquiries are of two types—hard and soft. The primary hallmark of a soft inquiry is that it doesn’t adversely affect your credit score, but a hard inquiry will.
What is a hard inquiry?
Hard inquiries get noted in your credit history when potential lenders with whom you’ve applied for credit pulls your credit report to make a decision. A hard inquiry reflects in your credit history and has the potential to influence your credit scores.
Common Examples of Hard Inquiries
- Home loan applications
- Student loan applications
- Credit card applications
- Auto loan applications
- Personal loan applications
What is a soft inquiry?
Soft inquiries occur when a lender checks your credit profile to pre-approve you for an offer or when you check your own credit report. Soft inquiries do not reflect on your credit report and don’t have any impact on your credit score.
Common Examples of Soft Inquiries
- Checking your credit scores
- Pre-qualified credit card offers
- Pre-qualified personal loan offers
How Hard Inquiries Impact Your Credit Scores
Too many hard inquiries in a short span of time is a concern. Because multiple hard inquiries mean that you need new credit accounts to manage your finances. That could reflect poorly on your financial habits. Therefore, hard inquiries may affect your credit score negatively, temporarily costing you precious credit score points.
How Soft Inquiries Impact Your Credit Scores
You do not have to worry about soft inquiries as they aren’t included in your credit score. When potential lenders pull up your credit report, they won’t see the soft inquiries. So, all the soft pulls of your credit report won’t count against you when you decide to apply for a loan.
How Long Inquiries Stay on Your Credit Report
Hard inquiries stay on your credit report for just over two years. The good news is that their impact reduces over time. Even if you have too many hard inquiries too soon, it’s unlikely that the potential lenders will solely base their decision on the hard inquiries. Although hard inquiries affect the credit score, there are other more important factors like on-time payment history, low credit utilisation score that lenders reviews to make a decision.
You cannot remove an accurate hard inquiry from your credit report. However, if a hard inquiry is made without your permission, you can ask the credit bureau to remove it from your credit report.
Soft inquiries aren’t linked to a specific credit application; hence they have no effect on your credit score nor are they considered as a factor while determining your credit score. Soft inquiries are just for references and hence cannot be disputable.
How to Dispute Hard Inquiries on Your Credit Report
As said earlier, if you do not recognize the hard inquiry that’s reflecting on your credit report, you have the right to dispute it. Although hard inquiries stay on your credit report for two years, you can dispute any errors. To dispute hard inquiries, follow these steps:
- Contact the credit bureau and let them know that the information in the credit report is incorrect. Send copies of documents that support your dispute.
- Contact your potential lender with whom you’ve applied for credit and let them know that you have filed a dispute. Also, send copies of documents that support your dispute.
- After you’ve informed both the credit bureau and the potential lender, the credit bureau has 30 to 45 days to investigate and send a response to your dispute.
Managing Your Credit Inquiries
These tips can help you manage the impact of hard inquiries:
- Apply for credit only when you need it.
- Check your credit report regularly to ensure that the hard inquiries reported are the ones you initiated. If you find unrecognized inquiries, file a dispute with the credit bureau.
- Manage other more important factors like payment history and credit utilisation rate well. Pay bills on time every month and pay off credit card debt as quickly as possible.
Note: You can check your credit report any time as many times as you want without it affecting your credit scores.
Checking your personal loan eligibility on MoneyTap is considered as a soft inquiry. Hence, it doesn’t affect your credit score. Want to check whether you are eligible for a personal loan with MoneyTap? Get the app now!