Soft Inquiry vs Hard Inquiry: Differences, Comparisons, Procedure, Credit Score
The difference between a soft credit check and a hard credit check is actually quite simple: The latter will affect your credit score whereas the former will not. However, there’s more to it than that.
Start raising your credit score today.Call 800-351-7286.
Soft Inquiry vs Hard Inquiry
Another key difference between a soft and hard credit inquiry, also referred to as a “credit check”, is that you have control over one but not the other. A soft inquiry can, and often is, performed without your consent or knowledge; a hard inquiry is always performed following your approval.
What lenders see:
- Soft Credit Check: Exactly what you see when you check your own report, including available lines of credit, payment history, collections, and loans.
- Hard Credit Check: The same information is shown, but it entails a different procedure and leaves a mark to warn other lenders the process has taken place.
When are Soft Credit Inquiries Performed?
Credit card spams are a perfect example of soft credit checks. The unsolicited cards that land in your letterbox are not sent completely at random. Providers need assurance that you can meet your repayments and won’t simply use all the credit and then disappear. A pre-approval is conducted in the form of a soft inquiry, giving them some basic information about your credit history and telling them whether they should send you a card or not.
Employers can also perform these checks. This might seem like an unfair practice. If you have a lot of debt and no job, it can trap you in a Catch-22 of sorts. However, employers believe that individuals with good credit are more likely to be responsible and less likely to become involved with fraud or theft—very important for companies in the financial sector.
The most common soft inquiry, however, is initiated when you check your own credit report. Every time you request your report from one of the major credit bureaus, you are initiating a soft inquiry.
Do Soft Inquiries Affect Your Score?
It’s worth reiterating this just in case it stops you from checking your score: A soft credit check will not negatively impact your credit score. You can do as few or as many of these as you want and your score will not take a hit. Conversely, abstaining from running soft credit checks will not improve your score in any way.
It’s recommended that you check your credit report at least once a year. It can be a daunting experiencing, especially if you have debt, but it’s one that will benefit you in the long run. Only by checking your score can you notice and remove disputes and gain a clear understanding of your financial status.
The things that you see when you check your credit report are the same things a lender or employee will see. So, if you don’t like the look of it, they won’t either and you need to do everything you can to improve it.
When are Hard Credit Inquiries Performed?
Your consent is always required before a hard inquiry is initiated. A hard credit check occurs whenever you file a credit application. Generally speaking, you won’t be given a line of credit without a hard credit check taking place.
There are exceptions to this rule and certain online payment providers (PayPal being the best example) have been known to offer credit based purely on a user’s previous transactions. However, these are rare and if you’re going through a major credit card, loan, student loan, or mortgage provider they will run a hard credit check.
This can complicate matters when you’re shopping around for rates, but credit scores do take this into account. FICO scores accommodate a 45-day period in which all “rate shopping” requests are classed as a single hard inquiry. VantageScore has something similar, although the period is much shorter.
Is it a Hard or Soft Credit Check?
Common sense doesn’t always apply here. There are some instances in which you might expect a soft inquiry but get a hard one. It depends entirely on the lender and on the loan/credit. The only way to know for sure is to read the terms and conditions or to ask them directly.
They are required to tell you and in many cases, lenders will explicitly repeat themselves if a hard inquiry is being initiated. As mentioned above, if your permission hasn’t been requested and received, then it should be a soft inquiry.
Why do Hard Inquiries Show on Credit Reports?
To understand why hard inquiries have a detrimental impact, you have to see things from the perspective of a lender. If hard inquiries didn’t reduce your score, then it would be possible for two people to have the same score even when one has been hit with dozens of hard inquiries in recent months and the other has none.
If you were trying to determine which one to lend money too, would you rather opt for the consumer who hasn’t been applying anywhere else and has a relatively clean record, or the one who seems to have applied for every line of credit available?
Repeated hard inquiries suggest that the user is desperate for credit and in a bad way, which in turn may suggest that they would struggle to meet repayments.
Do Hard Inquires Always Show?
If you have an extensive credit history, with many account closures, large lines of credit, a high score, and very few inquiries, then a hard inquiry may not show at all. If it does, it may only marginally reduce your score.
How Many Points are Lost with a Hard Inquiry?
A hard credit check can reduce a FICO score by as much as 5 points and a VantageScore by as many as 20 points. There is no fixed reduction, however, and it all depends on your credit history.
How Long Does a Hard Inquiry Stay?
A hard credit check will remain visible on your credit report for 2 years, but it will only impact your score for the first year.