Hard Inquiries and Soft Inquiries

Hard Inquiries and Soft Inquiries

There are two kinds of inquiries that can occur on your credit report: hard inquiries and soft inquiries. While both types of credit inquiries enable a third party, such as you or a lender, to view your credit report, only a hard inquiry can negatively affect your credit score.

What is a hard inquiry?

Hard inquiries generally occur when a financial institution, such as a lender or credit card issuer, checks your credit report when making a lending decision. They commonly take place when you apply for a loan, credit card or mortgage, and you typically have to authorize them. Most important to note, hard inquiries might lower your credit score by a few points and they may remain on your credit report for two years. As time passes, damage to your credit score usually decreases or disappears, often even before the hard inquiry falls off your credit report.

What is a soft inquiry?

Soft inquiries typically occur when a person or company checks your credit report as part of a background check. Examples include employer background checks, getting "pre-approved" for credit card offers and checking your own credit score. A soft inquiry may occur without your permission. Soft inquiries may be recorded in your credit report, depending on the credit bureau, but they won't affect your credit score.

One of the biggest misconceptions is that checking your own credit score using companies like Credit Karma will hurt your credit score. This is not the case. You can check your credit scores at Credit Karma as often as you like without affecting your credit score.

Examples of Hard Versus Soft Inquiries

While we mentioned some common examples of which financial actions result in a hard or soft inquiry, here are some lesser-known actions that may incur a credit inquiry.

Hard Inquiries
Soft Inquiries
Usually
  • Applying for an auto loan, student loan, business loan or personal loan
  • Applying for a credit card
  • Applying for a mortgage
Sometimes
  • Applying to rent an apartment
  • Verification of identity by a financial institution, such as a credit union or stock brokerage
  • Renting a car
  • Getting a cable or Internet account
  • Opening a checking, savings or money market account
  • Requesting a credit limit increase
  • Getting a cell phone contract
Usually
  • Checking your own credit score
  • Pre-approved credit card and loan offers
  • Background check, such as those done by employers
Sometimes
  • Applying to rent an apartment
  • Verification of identity by a financial institution, such as a credit union or stock brokerage
  • Renting a car
  • Getting a cable or Internet account
  • Opening a checking, savings or money market account


If you are unsure whether a financial action you are about to take will result in a credit inquiry, ask the financial institution or company. Also, if a financial institution or company informs you that they will be checking your credit, ask them to distinguish whether or not it is a hard or soft inquiry.

Why Hard Inquiries Hurt Your Credit Score

While hard inquiries are necessary for certain financial actions, such as applying for a loan or credit card, they should be limited as much as possible. Your credit score may be penalized for multiple hard inquiries because applying for too much credit at one time may indicate that you are desperate for credit, or that you aren't able to qualify for credit. While one hard inquiry will usually just knock a few points off your credit score, multiple hard inquiries in a short amount of time may cause significant damage to your score.

Keep your hard inquiries to one or two a year. Credit Karma data shows that on average, consumers with lower numbers of hard credit inquiries have higher credit scores.

How to Dispute Hard Credit Inquiries

If a hard inquiry occurred without your permission, check your credit reports to see the full details of the inquiry and determine if you should attempt to dispute it.

Note that you can only dispute hard inquiries that have occurred without your permission. If you have authorized the hard inquiries, it generally takes up to two years for them to be removed. You can learn more here.

Conclusion

Before applying for credit, take time to build your credit score. With a higher credit score, you'll improve your chance for approval for the financial products you want and at the best terms and rates.

To keep track of hard inquiries, check your credit scores and credit reports at Credit Karma. In addition to providing you with your free credit scores from TransUnion and Equifax, Credit Karma notifies you of any important changes to your TransUnion credit report, including any new hard inquiries.

Editorial Note: The editorial content on this site is not provided by the bank or issuer. Opinions expressed here are author's alone, not those of the bank or issuer, and have not been reviewed, approved or otherwise endorsed by the bank or issuer. Credit Karma may be compensated by companies mentioned through advertising, affiliate programs or otherwise. It is this compensation that enables Credit Karma to provide its members with services like free access to your credit scores and free monitoring of credit and financial accounts at no charge.

 

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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I am impressed, I know a lot of what was said here from past experience and you are gaining good advice. Car salesman will do multiple hards hits with ONE permission trying to find a company that wil give you a deal. They do not tell you that. Applying for any credit card, to get the free T-shirt or book bag, will be a hard hit on your score. Never go more than 50% of your credit limit of your scores goes down. If your limit is $1000, do not put more than $499 on that card. Also, when the credit card companies see you getting into higher debt with them and other companies. they suddenly start to raise your interest rate even though you were not late on your payments. They see you are struggleling with your  finances and go in for the kill because they can. If ever you get a call from a collection agency, tell them to wait while you start your tape recorder and ask them permission to record the conversation. They will either hang up or properly handle the situation. They are not allowed to threaten you with a lawsuit, call you at work, call you too early or too late at night, or mutilple times a day. They may leave a msg with their name and number to return their call. However,  not about them being a collection agency on an answering maching or voice mail that says why they are calling becuase anyone could hear the message and that would be a break of confidentialitey and a potentional Liable suit. If you are in trouble seek out a not for profit agency to help, not one that takes monthly payments from you and then says they will pay your creditors. That story always ends badly. I found HUD and Chatholic Charities very hellpful with No cost to me after I was in a car accident and unable to work for three years. Do not talk to anyone over the phone for more than an minute, tell them always do it by U.S. Postal mail, not emai either. In the event they harass you or do anything else the Fair Credit Bureau allows. you have an address to send a Letter or Sheriff to. Also, never admit to any debt until they prove you owe the money. Many times these debts get sold over and over again to another collection agency and the original paperwork is lost, so they can not prove you owe the money. I had ATT harass me for six years for a debt they said I owed of $30. I never had an account with ATT and asked them to prove . Every six months a new collection agency called saying I owed ATT but the amount kept going up. It wasn't until my lawyer handling my car accident sent a demand letter asking for proof of the debt, that the calls stop. Also, regular installment payment like a car or mortgage are good for building your credit, but they like to see revolving payments too as in Department stores, one month $213, pay it off, one month $399 pay it off, one month $29 pay it off.  Remember to have a personal relationship with your local bank. If they know you and like you they can bend the rules a little.

Reply by
kkay1

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I totaly agree with what your saying What got me is I had told the Car Dealer that i was already approved and he said it wouldnt hurt to SEE Well there were 5 hard inquirys from that 1 dealer!! My score went way down and they could not find me a better deal than what i was already approved at!! I am going to contact the credit bereaus and explain, hopefully they can take one or two off!! Learned my lesson!! And i work so hard to have a good rating!!!

Reply by
GMCEnvoy123

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This is a wonderful and very helpful tool in trying to clean up your credit report.  It takes you half your life to realize how very important a clean credit report is. But, I guess that's just life for you.  I am being very concientous of everything I do now. I want my credit report clean, like it used to be before a very bad marriage and man, both of which are gone...:  ).  Thank you very much for this service.

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919 People Helped

Helpful to 919 out of 1000 people

CreditKarma is so-so on its quality of reporting.  I see one debt that I haven't had for many years.  Of course, all the debts I paid off this month will not show up for probably two months.  Good advice not to let car dealers check your credit.  I used to bring a copy of my credit report and said I would show it to them if I was serious about a car, and would probably arrange my own financing at a local bank anyhow.  But younger people who don't know the credit game will get knifed in the back by not knowing the rules of the game, because it is a jungle, and survival of the fitess.  Kudos to CreditKarma, though, for the education for the masses and this forum.

Reply by
njazrael71

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Helpful to 297 out of 357 people

Not entirely suire why you claim CreditKarma is only so-so on quality of reporting. They can only pull from your creditors and the 3 major credit reporting bureaus. It's up to you to ensure they have proper information.
You bringing a copy of your credit report means nothing if you are bringing an old one or are not bringing them from all 3 agencies. Dealerships could care less what's on your report. They care only about the score AND if you were saying you would secure your own financing, then they dont even need to run your report or score to begin with.

2 Contributions
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Helpful to 905 out of 972 people

check this out      http://activerain.com/blogsview/1151616/can-you-sue-a-car-dealer-for-excessive-hard-credit-inquiries-

look for     Auto Loan Inquiries   read the following parigrgh ""Fair Isaac changed the rules a bit for Auto and Home Loan credit inquiries:

The credit-scoring model recognizes that many consumers shop around for the best interest rates before buying a car or home and that their searching may cause multiple lenders to request their credit report. To compensate for this, multiple auto or mortgage inquiries in any 14-day period are counted as one inquiry.

In the newest formula used to calculate FICO scores, that 14-day period has been expanded to any 45-day period. This means consumers can shop around for an auto loan for up to 45 days without affecting their scores. But the old 14-day rule might still apply at some lenders that aren't using the new version.""

Reply by
MrOskiBear

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Helpful to 357 out of 409 people

Debi423 said this isn't true, so I wanted to clarify.  The multiple instances still appear as multiple instances on the report, but they only count as a single instance when calculating your score.

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343 People Helped

Helpful to 343 out of 405 people

I only applied for a **** credit card because I read that it would improve/help to rebuild my credit. Then i get approved, and come back a week later to see my credit rating went down 14 points? What gives? If Credit Karma is going to pimp the credit cards, perhaps they should ensure that this information is understood before you hit that 'apply' button. Highly iritated.

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