What Is a Credit Inquiry?
A credit inquiry is a request for credit report information from a credit bureau. Credit inquiries are typically made by financial institutions to help them determine whether to approve you for credit. But credit inquiries can be made for many other reason as well, such as if you want to check your own credit. The two main types of credit inquiries are a hard inquiries and soft inquiries.
Key Takeaways
- Companies check your credit when they make lending decisions such as for mortgages, personal loans, or auto loans.
- Soft inquiries usually are made when you request a credit report yourself or for pre-approvals.
- A hard inquiry is usually made when a company is making an official lending decision when you apply for a loan.
- A hard inquiry can affect your credit score, while a soft inquiry will not.
How a Credit Inquiry Works
Credit inquiries are when there is a request to review your credit history, which includes your history of missing payments and the total amount of debt you are using. You can make a credit inquiry yourself, or lenders or other companies may make a credit inquiry on your credit for a variety of reasons.
There are two main types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries are made by lenders after you apply for a loan as part of the underwriting process to help lenders assess risk. Soft inquiries can be made even if you didn't apply for credit for reasons such as to help credit companies to market their products.
Hard inquiries and soft inquiries are both pulls on your credit report, but they do not have the same affect on your credit score. Soft inquiries will have no impact on your credit score while hard inquiries will temporarily negatively affect your credit score.
Let's look in more detail at the differences between a hard credit inquiry and soft credit inquiry.
Hard Credit Inquiry
Hard inquiries are requests made my lenders when you apply for credit. A lender can use your Social Security number to make a hard credit inquiry to receive a full credit report that helps them with the underwriting process, such as when you apply for loans like mortgages or credit cards.
A credit report includes your credit score and details on your credit history, such as whether you've had late payments and how much of your credit you are using. It will detail your total available credit and the length of your credit history.
Hard inquiries negatively affect your credit score and remain on your credit report for up to two years. Generally, a high number of hard credit inquiries in a short period of time can be interpreted as an attempt to substantially expand available credit, which creates higher risks for a lender.
In some cases, credit repair companies that help you improve your credit may be able to get the hard inquiries removed from your credit report sooner than two years.
Hard inquiries also may be used for employment background checks or for property rentals.
Soft Credit Inquiry
Soft credit inquiries can be included on a credit report, but they do not affect your credit score. These inquiries can be requested for a variety of reasons, such as if you want to review your own credit or a company wants to market products to you.
You can often get a free monthly credit score through your credit card companies. These credit scores are obtained by the credit card company through a soft inquiry.
Credit-aggregating services also use soft inquiries in a sort of pre-approval to help borrowers find a loan. These platforms require information about a borrower, including their Social Security number, which allows for soft inquiries and prequalification offers. Many lenders also will provide a borrower with quotes through a soft inquiry request that can help them understand potential loan terms.
You have a right to a free annual credit reports from each of the three major credit bureaus: Experian, TransUnion, and Equifax. Get your free credit report from AnnualCreditReport.com.
Does a Credit Inquiry Hurt Your Score?
A credit inquiry will appear on your credit report, but whether it will hurt your score will depend on a number of factors. If it is a hard inquiry, in can negatively affect your credit score. Soft inquiries, such as those for pre-approvals, do not affect your credit score.
How Long do Hard Credit Inquiries Stay on Your Credit Report?
Hard inquiries can stay on your credit report for up to two years, although they will likely only negatively affect your credit score for one year. A hard inquiry affects your credit score because it indicates that you need credit, which lenders can view as a sign of risk.
Do Soft Inquiries Appear on Your Credit Report?
A soft credit inquiry may appear on your credit report, but it will not affect your credit score. A soft credit inquiry can be made, for example, by yourself if you want to review your credit, or by lenders who want to pre-approve you for products.
The Bottom Line
A credit inquiry is when a creditor checks your credit report and it can occur for any number of reasons. The two types of credit inquiries are hard credit inquiries and soft credit inquiries. Too many hard inquiries on your credit report can negatively affect your credit score while a soft inquiry will have no effect.
