Hard vs Soft Inquiry: Do Credit Inquiries Affect Credit Score?

Your credit score plays a key role in shaping your financial opportunities, from securing loans and credit cards to renting a home. Every time your credit report is accessed, it may include inquiries that fall into two categories: hard inquiry or soft inquiry.

Understanding the difference between these two helps you manage your credit profile. It also improves your chances of getting favourable loan terms.

Here is a table showcasing the differences between a soft inquiry and a hard inquiry :

A hard inquiry, also known as a hard check or hard pull, occurs when a lender reviews your credit report. This typically happens when you apply for a credit card, personal loan, auto loan, or any other type of credit. The lender reviews your credit report to evaluate your creditworthiness. This allows them to determine whether to approve your application. 

Hard inquiries are recorded on your credit history and can slightly impact your credit score. It is important to be aware of when hard inquiries happen and how they affect your credit score.

Limiting them can help you maintain a healthy credit profile.

Here are examples of when you may face a hard inquiry:

• Applying for a new credit card

• Applying for a personal loan, home loan, auto loan, or loan against property

• Requesting a credit limit increase on your credit card

• Applying for a balance transfer or refinancing option

Hard inquiries stay on your credit report for up to two years. However, only those from the past 12 months usually affect your credit score. If you have a strong credit history, a single hard inquiry is unlikely to hurt your score.

If you have limited credit accounts or a short credit history, hard inquiries can impact your score more noticeably. Keeping track of your applications can help you maintain a healthy credit profile.

A soft inquiry/soft pull/soft credit check, is a credit check that does not impact your credit score. It is typically used for background checks, credit monitoring, or pre-approved lending offers.

Soft inquiries take place when you check  your credit report for informational purposes. They remain invisible to lenders during credit decisions. Unlike hard inquiries, they do not require your explicit permission.

Here are some common situations where soft inquiries occur:

• Undergoing a background check conducted by an employer as part of the hiring process

• Receiving a pre-approved loan or credit card offer based on a lender's profile review

• Obtaining utility services or insurance coverage where the provider checks your credit

Unlike hard inquiries, soft inquiries do not indicate an increase in your debt load and do not impact your credit score. They remain on your credit report; however, only you can view them. Lenders assessing your credit history for loan decisions will not see these inquiries.

To reduce hard inquiries on your credit report, you need to be strategic with your credit applications. Use pre-qualification tools offered by many lenders to assess your eligibility.

This helps you avoid triggering a hard inquiry. Avoid submitting multiple credit card or loan applications within a short period. 

Monitor your credit report regularly to ensure accuracy. Dispute any discrepancies directly with the credit bureaus.  

You cannot remove valid hard inquiries from your credit report. Disputing a legitimate hard inquiry will not alter your credit score. However, you have the right to dispute any hard inquiry you do not recognise with the credit bureaus.

Unauthorised hard inquiries may indicate credit fraud. An identity thief may open a new account in your name using your personal information.

Know the difference between hard and soft credit inquiries to protect your credit score. This also helps improve your credit over time. Soft inquiries are harmless and remain visible only to you. Hard inquiries can affect your score and stay on your report for up to two years.

Apply for credit responsibly and use pre-qualification tools to minimise unnecessary hard inquiries. Monitor your credit report regularly to maintain a healthy credit profile. Stay alert for any unfamiliar hard inquiries, as these may signal identity theft.