Skip Tags

Popular Tags

Decorative icon

The Resource Center Credit Fraud & Credit Monitoring | article

How Hard and Soft Inquiries Affect Credit Reports and Scores

Your credit score is an integral factor in whether you receive a line of credit. From a mortgage to an auto loan to a new credit card, lenders look at your credit score* to help them determine the likelihood of you defaulting on your debt. Creditors will also use your credit score to assign interest rates to your loan.

Because of the importance of a good credit score, you should understand how simple actions affect your ratings. While you may be aware that your payment history and the amount you owe accounts for a large percentage of your scores, you may not realize that credit inquiries also factor into your credit score.

What Is a Credit Inquiry?
A credit inquiry appears on your credit report each time a lender accesses your credit history to determine whether you are eligible to receive a loan or favorable interest rate. There are two types of credit inquiries, but only one affects your credit score. Understanding the difference between a hard and soft inquiry may help you keep your credit reports and scores in order.

Soft Inquiries
When checking your credit reports, you may notice a number of credit inquiries conducted by businesses you don't know. These inquiries are often done by lenders or banks that are trying to determine whether a borrower may be eligible for a pre-approved credit offer.

These are called soft inquiries and are done without your permission, which is why many scores, including a FICO credit score, do not factor these credit checks into their calculation.

Hard Inquiries
With a hard inquiry, you grant a lender permission to review your credit history. This type of inquiry, which accounts for about 10 percent of a person's score, occurs when you apply for a new line of credit, such as a credit card or auto loan. Applying for multiple lines of credit at one time signals to lenders that you may be a greater credit risk. As a result, you may see your score take a slight hit.

If you are applying for a mortgage, you may worry that with numerous lenders checking their credit, your score may suffer. This isn't the case. When shopping for competitive interest rates, your scores do not drop because of each credit inquiry.

Hard inquiries may appear on your credit report for up to two years; however, FICO scores only consider inquiries that have been made during the last 12 months.

If you are applying for a mortgage, you may benefit from not simultaneously applying for credit cards, as this may lower your credit scores and your chances of securing a home loan. Learning ways to protect your good credit score may improve your chances of obtaining credit.

Learn More

*The scores you receive with Identity Guard® are provided for educational purposes to help you understand your credit. Lenders use many different credit scoring systems, and the scores you receive with Identity Guard are not the same scores used by lenders to evaluate your credit.

Credit scores are provided by CreditXpert based on data from the credit reporting bureaus.