Hard vs. Soft Credit Inquiries: What's The Difference?

Lenders will typically record their formal evaluation of your credit files in the form of a hard inquiry when they verify your credit. Creditors look at these reports to determine if they should extend your credit, what interest rate they should charge you, and whether or not they should reject your application altogether due to negative information.

They are also interested in your credit utilization ratio and length of time managing credit responsibly. All these things go into the calculation that creditors use to determine whether or not to provide you credit.

A hard credit draw might be intimidating, but you can protect yourself from any shocks by closely monitoring your credit reports. Performing a soft credit inquiry, often known as a "soft draw," is common when checking one's credit. Let's dive deeper into what sets hard credit inquiries apart from soft ones.

What Is A Hard Inquiry?

You'll likely encounter them if you apply for a mortgage, loan, or credit card and will be asked to authorize each individual. Your results can drop somewhat or not if you're subjected to challenging questioning.

It's doubtful that a single hard inquiry will significantly impact your ability to get a new credit card or loan. Even before the inquiry is completely removed from your credit reports, the negative impact on your credit scores should begin to lessen.

How Many Hard Inquiries Are Too Many?

How much a hard inquiry lowers your credit scores is determined by your credit history as a whole. A little drop in score is possible after adding one or two complex queries to your credit reports, but this is highly uncommon. However, your marks will likely be more affected by answering many challenging questions in a short amount of time.

This is because numerous loan applications in a short period are interpreted negatively by lenders and, consequently, credit scoring algorithms. However, this rule may be broken while looking for certain kinds of loans, such as auto loans, student loans, or mortgages.

What Is A Soft Inquiry?

In most cases, a soft inquiry will occur when a potential employer or landlord examines your credit as part of a more comprehensive background investigation. This might happen, for instance, if the credit card company analyzes your credit without your knowledge to see if you qualify for a particular credit card.

The recruiting process may include a "soft inquiry" from the company you're applying to work with. Soft inquiries do not have the same impact on credit ratings as complex queries. You can only see soft inquiries when you check your credit reports, as they aren't tied to any specific credit application.

Will Monitoring My Credit Cause A Hard Inquiry?

No. A gentle inquiry like this won't negatively impact your credit ratings. Credit Karma gives you free and unlimited access to your VantageScore 3.0 credit ratings from the two major credit bureaus.

How To Contest Credit Application Requests

To keep tabs on your credit, check it frequently. Consider contesting with the credit bureau any inaccuracies you find, such as a hard inquiry that was performed without your authorization. The Consumer Financial Protection Bureau is another resource you may turn to for answers.

One of the three main credit bureaus, Experian, has identified this as a possible identity theft indicator. You should probably research it to at least get a sense of what's going on. It's important to remember that you can only challenge mandatory queries made without your consent. A hard inquiry you approved will be on your credit reports for two years.

How To Reduce The Impact of Credit Inquiries

Don't allow the prospect of a higher hard inquiry limit to prevent you from looking around for the best possible interest rates when financing a house or vehicle purchase. Inquiries about large loans, such as a mortgage or car loan, don't affect your FICO® score for 30 days. Also, during a particular time frame, FICO may treat numerous inquiries for the same loan type as a single query.

As a rule of thumb, this time frame averages 14 days. Since you usually won't tell which assessment model a lender employs to determine your credit score, it's best to stick to a 14-day limit for shopping around, even though some lenders utilize scoring algorithms that allow you to browse for longer without affecting your credit score.