A hard inquiry which is also known as a hard pull generally occurs when a financial organization such as a lender or credit card issuer, does a credit score inquiry while making a decision. They commonly occur when you apply for a personal loan or a credit card and you have to sanction them. A hard inquiry could certainly lower down your score by a few points, or it may have a negligible effect on your scores. In most of the cases, a single hard inquiry is unlikely to play a crucial role in your approval for a new credit card or any loan, the harm to your credit scores usually declines or disappears even before the inquiry drops off your credit reports for the good.
Generally, a hard inquiry stays on an individual’s credit report for almost 2 years. This is actually not a bad thing, but many people prefer to think a number of times before applying for a handful of credit cards at the same time- or even within the span of a few months. Multiple hard inquires in a short period could lead lenders and credit card issuers to consider you a customer who is at high risk, as it is suggested you may be left short of cash or getting ready to rack up a lot of loans. So you can always consider spreading out your credit card applications.
What is a Soft Credit Score Inquiry?
Soft inquiries also known as soft pulls generally occur when a person or a company checks your credit as part of a background check. This may occur, for example, when the one who is being issued a card checks your credit prior to your permission to see if you are eligible for availing any of the credit card schemes or offers. Your employer can also run a soft inquiry before hiring you. On the contrary soft inquires never affect your credit. They might or might not be mentioned in the credit report of yours, in relation to the CIBIL bureau. Since soft inquiries aren’t connected to a specific application for new credit, they’re only visible to you when you view your credit reports.
Differentiating Hard and Soft Credit Score Inquiry
The difference between hard and soft inquiry roots down to whether you gave the lender permission to check your credit. If you did, it may be reported as a hard inquiry. If you didn’t, it should be reported as a soft inquiry.
Let’s get to know the concept with the help of some examples. When a hard or a soft inquiry might be placed on your credit reports. Note: The following lists are not exhaustive and should be treated as a general guide.
Some of the common Hard Inquiries include
- Auto Loan Applications
- Mortgage Applications
- Credit Card Applications
- Apartment Loan Applications
- Personal Loan Applications
- Mortgage Applications
Some of the Soft Inquiries are:
- Checking your credit scores on Credit Karma
- Pre-qualified credit card offers
- Pre-qualified insurance quotes
- Employment Verification (i.e. background check)
Keeping in mind, there are various types of credit checks that could show up as either a hard or soft inquiry. For the case of the example, utility, cable internet and cell phone providers will often check your credit details. If you’re unsure about how a particular inquiry will be classified, asks the agency or the company, credit card issuer or the financial institution involved to distinguish whether it’s a hard or soft credit inquiry.
Minimizing the Impact of Hard Credit Score Inquiry
When you’re purchasing a home or a car, don’t let a fear of racking up multiple hard inquiries stop you from shopping for the lowest interest rates.FICO gives you a one month grace period before certain loan inquiries are reflected in your FICO credit scores. And FICO may record multiple inquiries for the same type of loan as a single inquiry till the time they’re made within a certain window.
For the FICO scores calculated from older versions of the formula meant for the settling of scores, this window is 14 days; for FICO scores calculated from the newest versions of the scoring formula, it’s 45 days.
Similarly, the Vantage Score model gives you a rolling two-week window to shop for the best interest rates for certain loans. “That way, only impact your credit score once,” the company says.