Credit inquiries or credit pulls are part of the process when you're securing a loan, getting a new credit card, or buying a home. Asking questions like "What's the difference between a hard inquiry and a soft inquiry?" should also be part of the process so you can understand the difference and make strategic financial decisions about where and when you make inquiries

What Is a Credit Inquiry?

Credit inquiries are requests that a third party makes to review your credit reports. The two main types are hard credit inquiries and soft credit inquiries, and the three credit bureaus from which these inquiries can pull information are Equifax, Experian, and TransUnion. Credit inquiries tell authorized people information about your payment history, credit history, accounts, and types of debt. They can also display your credit score, which represents the risk you present to lenders.

Hard Inquiry vs. Soft Inquiry: The Key Differences

So, what's the difference between a hard inquiry and a soft inquiry? Hard and soft inquiries are used for different purposes and can impact your credit score differently. For example, a hard credit pull for a new line of credit may decrease your score, while a soft credit pull which might occur for something like a job background check, won't impact your credit score. In a nutshell, hard credit pulls may reduce your credit score. Soft inquiries will not impact your credit score.

Hard Inquiry 

A hard inquiry is a request for your credit information so organizations can make a lending decision. For example, a mortgage pre-approval application, a credit card application, or a car loan will trigger a hard inquiry. These inquiries can lower your score in the short term because multiple hard inquiries can indicate that you're a bigger risk to lenders. Hard inquiries on your credit will be visible on your report for up to two years. 

Soft Inquiry

Soft inquiries are for informational purposes only. For example, an employer may pull your credit as part of a background check, or your lender may run a soft pull to pre-qualify you for a mortgage loan. These inquiries don't affect your score and are only visible to you on your credit report. 

Does a Soft Pull Affect Credit Scores?

No, a soft pull doesn't affect your credit score. That's because you're running the report only for informational purposes like monitoring your score, pulling background checks, or renting a home. 

Hard Credit Check vs. Soft Credit Check: A Deeper Dive

At first glance, hard and soft credit checks can seem identical. They often reveal exactly the same information. However, hard checks are a vital step in many loan approval processes, and because you're actively applying for loans or lines of credit, they lower your score in order to notify lenders about the increased risk you may represent. However, the decrease in your score is only temporary.

Why Hard Inquiries Matter

Hard inquiries should only be completed when you're certain you want to move forward with a loan or credit card because they do impact your score. Hard inquiries also matter because even though the reduction to your score is short-term, they stay visible on your credit report for up to two years. 

When Soft Inquiries Are Used

• A landlord wants to be sure you represent limited financial risk
• You want to understand your own credit history
• The credit inquiry is part of a background check or security clearance process to ensure you don't have extensive or risky debts

Manage Your Credit Wisely

At Canyon View Credit Union, our team is here to help you navigate personal finance, starting with your credit! We can help you understand the difference between a hard inquiry vs. soft inquiry reports, start earning credit, increase your credit score, or safely monitor your own credit score online. We can also help with credit or deb counseling; learn more about credit counseling here and start your path to financial confidence.