Hard vs Soft Credit Report Inquiries: Here’s the Difference



Increasing Your Credit ScoreIt is common practice for a person’s credit report to be pulled by creditors or lenders when someone wants to secure a loan for a home or automobile or open a credit card account. Thanks to the Fair Credit Reporting Act, there are laws designed to protect consumers when it comes to their credit information being collected.  As a result, when someone’s credit file is viewed, it is considered either a hard or soft credit inquiry.

Due to the adherence of certain procedures by all parties who request to view a consumer’s credit report, consumers know that their credit will need to be pulled from time to time, but what’s the difference between hard and soft credit inquiries?

Hard Credit Inquiries

A hard credit inquiry, also known as a hard pull, is a request made by a creditor or lender to review someone’s credit profile when they are seeking credit.

For example, when applying for a personal loan or credit card, the applicant grants the lender permission to view their credit report. Credit reports include information about the consumer’s ability to manage debt and credit by providing details about things like the number of credit accounts they own, the type of credit accounts they own, and the amount of debt a person may have. Lenders like to review each applicant’s credit report and the information reflected on the report to determine if an application should be approved or denied.

Since the applicant is seeking to open a new credit account, it will appear as a hard inquiry on their credit report even if the application is denied. Once a hard inquiry appears on a credit report, it will remain for two years. Each of these inquiries that are listed will provide details as to when someone applied for credit and how often. This information is factored into a person’s credit score, so it can be harmful to have too many hard inquiries listed.  In fact, hard inquiries can result in a decrease in credit score.

Soft Credit Inquiries

A soft credit inquiry, also known as a soft pull, is a request made by an individual, company, or financial institution to review someone’s credit profile when they are not seeking credit.

For example, when a consumer decides to view their own credit report to confirm that the information listed is accurate and up to date, or when an employer is performing a background check on a potential employee and needs to verify their identity. The consumer is not submitting an application for credit, so this is considered a soft inquiry. Unlike a hard credit inquiry, this type of inquiry does not show up on credit reports. Although, the consumer will be able to view each of these instances, whether their credit report was viewed by the consumer, potential employer, or another individual, lender, or company that needed additional information about the consumer.

In some cases, someone who is interested in securing a personal loan may decide to check rates or pre-qualify for a loan before submitting an application. Although the lender is using the applicant’s credit information to provide potential rates for the personal loan, it is considered a soft inquiry because there was not an actual application for credit submitted.

It may not always be disclosed whether a credit inquiry will be soft or hard. Depending on the reason for the inquiry, consumers may be able to determine the type of inquiry, but it is not a bad idea to ask. With hard inquiries impacting credit scores in a negative way, and soft inquiries having no impact, consumers want to be cautious of how many hard inquiries they have listed.