Knowing the difference between a hard inquiry and a soft inquiry on your credit report is important. A hard inquiry can affect your credit score, which in turn can change the interest rate you qualify for on a loan. A soft inquiry, although visible to you on your credit report, will not be shown to lenders; it has no effect on your score.
When you request your own credit report and credit score, it is considered a soft inquiry. So are inquires associated with pre-approved credit card offers, applications for business credit, and background checks. If a company you hold an account with does a routine credit review, this will also fall into the category of soft credit pulls. A routine review may lead to a lender increasing your credit limit without you having to ask.
(NOTE: Bond Street makes soft inquiries; our review will have NO impact on your credit report)
When a lender requests a copy of your credit report after you’ve submitted an application for a personal loan or a credit card, it is typically a hard inquiry. Once made, hard inquiries can remain on your credit report for up to two years. When another lender views your report, your prior credit application will be visible; it may be taken into consideration in the review of your new application.
Hard enquiries can lower your credit score – especially if you have multiple inquiries within a short amount of time – as it may be evidence of your inability to qualify for credit, or your desperation for a loan. Credit Karma, a credit-monitoring site, suggests keeping the number of hard inquiries to two or less a year.
Although it is not always the case, there are several other instances that may incur a hard inquiry. If you are worried that any of the following may affect your credit report and score, ask if the request will be a hard or soft inquiry, before granting permission for the institution to check your credit.
Hard inquiries may occur in the following instances:
- A credit check as part of a rental application for a house or apartment
- Identity verification for a financial institution, i.e. a stock brokerage or credit union
- Car rental
- Opening an internet or cable account
- Requesting an increase to your credit limit
- Taking on a new cell phone contract
- Opening a savings, checking or money market account
If your credit is in good condition, the impact of a hard inquiry will be minimal. Hard inquiries are normal when you apply for a mortgage or other types of loan; the goal should not be to eliminate these inquiries altogether. If you find a hard inquiry on your credit report that occurred without your permission however, and you’re fairly certain it’s affecting your credit score, you can dispute it by calling the lender directly.
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