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Hard vs Soft Credit Inquiries: How They Differ and Why It Matters

Hard vs soft credit pull
Fiona Staff7/29/2022

Your credit score plays a vital role in many aspects of your financial life. A healthy credit history can unlock certain products and competitive loan terms, while a low score can keep you from buying a home, refinancing your student loans, or even opening the credit card account you want. 

Every consumer’s credit score is determined by the information contained within their individual credit report, including recent inquiries. However, there are two types of credit inquiries to note; here’s a look at the difference between hard and soft credit inquiries and why each one matters.

What Are Credit Inquiries? 

Anytime a potential creditor wants to look at your credit report, they will conduct an inquiry through one or more of the three credit bureaus (Experian, Equifax, and TransUnion). This request gives the creditor access to certain information from your credit history, such as your:

  • current or past accounts

  • existing balances

  • payment history

  • how long you’ve had those accounts

They can use this information to determine your creditworthiness and whether or not to approve you for the account or services they offer. The information from your credit report is also used to calculate your credit score.

FICO, offered by the Fair Isaac Corporation, is the most common credit scoring model used today. The FICO model considers many aspects of your credit history, but new credit accounts for a full 10% of this score.

Hard vs soft inquiries

There are two types of credit inquiries that you might encounter when seeking out a new credit card or loan: the hard inquiry (also called a hard pull) and a soft inquiry (or soft pull). Either one can be initiated by an eligible company such as a bank, credit card issuer, mortgage lender, or even an auto insurance carrier. 

Hard inquiries occur when you initiate a credit-based request, or ask to borrow money from a financial institutionThis can happen if you are:

  • Applying for a new credit card

  • Trying to take out a home mortgage loan

  • Are requesting a student loan refinance

  • Asking for credit limit increase with an existing lender

Soft inquiries usually happen when you are shopping around for credit, though it’salso possible when you’re not actively searching 

If you are looking to get pre-approved for a loan, a lender may be able to offer you a tentative approval and even likely interest rates with just a soft pull. If you’re happy with the terms, you can then choose to formally apply (which generally results in a hard pull). Soft pulls may also occur if you shop for a new auto insurance policy, apply for a job, or open a utilities account in a new home.

Some creditors may also conduct a soft pull without your knowledge. A bank may use a soft inquiry to determine which pre-approved offers they want to send your way (these are often unsolicited). Your current credit card company could also use a soft pull to decide whether or not to bump up your credit limit. When you see a pre-approved offer on Fiona, the lender has determined that you meet certain approval criteria based on a soft pull of your credit profile that Fiona has performed.

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The impacts of hard inquiries

With a hard pull, the inquiry will be reported to the credit bureaus, where it will be notated on your credit report. This inquiry will usually stay on your credit report for two years, when it will automatically age off. 

A brand new credit inquiry can potentially ding your credit score,at least initially. The true impact depends on many personal factors, like your existing score, the extent of your credit history, and how many recent inquiries you have.

Around the six-month mark, that inquiry becomes less impactful and your score will usually creep back up. After a year, hard pulls will still show up on your credit report, but will no longer affect your score.

Having too many hard pulls in a short period of time can be a red flag for some creditors. While they are unavoidable, especially if you’re applying for a new credit-based product, it’s important to limit them when you can.

The impact of soft inquiries

Soft pulls will have no effect on your credit score. You can use these inquiries to get pre-approved for certain types of loans or may encounter them the next time you allow a landlord to run a credit check. They don’t ding your credit score and they won’t hurt your report. 

However, a soft pull can easily lead to a hard pull. 

For example, if you get pre-qualified for an auto loan refinance, a soft pull may allow you to see the loan limits and interest rates available to you. If you want to proceed with one of those loans, you’ll generally need to complete your application through that lender,at which time, they’ll usually initiate a hard pull.

Bottom Line

Both hard and soft credit inquiries each have their place in your life. Both can be beneficial when trying to apply for new products and services or open specific types of financial accounts. 

While soft inquiries don’t damage your credit score, they can often be a precursor to hard inquiries, which give potential lenders a comprehensive look at your creditworthiness. Even though a hard pull has the potential to ding your score initially, this impact is often limited and can be worthwhile if you’re able to qualify for the loans, accounts, or services you need most.

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