You get a credit inquiry every time a creditor or lender “asks” a credit bureau for a look at your credit report. Depending on the type of request being made by the creditor, that credit inquiry may end up on your credit report. Whether it ends up on your report or not depends on the type of inquiry because there are two types of inquiries – hard pull and soft pull.
- A hard credit inquiry occurs when a lender with whom you’ve applied for credit reviews your credit report as part of their decision-making process. This type of inquiry appears on your credit report and can influence your credit scores.
- A soft credit inquiry occurs in cases where you check your own credit or when a lender or credit card company checks your credit to pre-approve you for an offer. Soft inquiries do not appear on your credit report and do not impact your credit scores.
So let’s say you apply for some type of credit (a mortgage, auto loan or credit card) the lender (with your permission) willcheck your credit report and credit score from one or more of the major credit bureaus. Because these inquiries are tied to an actual credit application, they’re considered hard inquiries or hard “pulls”, and they can affect your credit scores.
Now…let’s say you want to check your own credit report (or give permission to someone like a potential employer to review your credit report). In this scenario a soft inquiry or soft “pull” occurs. Soft inquiries can also occur for al
l of those pre-approval offers you get in the mail. You get those letters after a businesses, such as lenders, insurance companies, or credit card companies, check your credit. Thank goodness those don’t count against you.
The reason the soft pulls don’t count against you is because they aren’t linked to a specific application for new credit. This means they’re only visible on your credit report to you. Potential lenders won’t be able to see them (except insurance companies may be able to see other insurance companies’ inquiries), and soft inquiries are never considered as a factor in credit scoring models.
How a Hard Credit Inquiry Impacts Your Credit Scores
We all know someone who has been denied credit because they have too many hard inquiries. If you have too many hard inquiries it looks like you are chasing credit and that sends the wrong message. When a lender sees a bunch of hard pulls, especially in a short period of time it makes it seem like you are desperate or possibly in a bad situation financially. Even if that’s not the case. As a result, hard inquiries have a temporary, negative affect on your credit scores.
Credit scoring models will batch several major purchase inquiries in a short period of time because you could be rate shopping for the best loan deal available. Batching is where multiple inquiries in a short period only count as a single inquiry, which will have a smaller impact on your credit score than multiple, separate inquiries. It’s important to remember the batching process is only for major purchases. Credit card inquiries are not viewed in the same way because each credit card inquiry can result in a new credit card instead of a single purchase.
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