Your Credit Report: Hard Inquiry vs. Soft Inquiry – What’s the Difference?

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When potential creditors (such as banks, loan providers, or credit card companies) request your credit report, it can be done in one of two ways: a hard inquiry or a soft inquiry. You may have heard that terminology and wondered what the difference is and how it potentially impacts your credit score.

The single biggest difference between a hard inquiry and a soft inquiry is that the soft inquiry usually doesn’t negatively impact your credit score, it simply provides a high-level overview of your credit that creditors don’t need your explicit permission to request.

Let’s say you received credit card offers in the mail or offers to apply for student loans (particularly student loan refinancing). Before those offers were made to you, the credit card company or other lender probably prescreened your credit by making a soft inquiry into your credit report. These types of companies only offer credit to consumers who meet certain qualifications. That typically means they’re looking for applicants with a credit score meeting their minimum credit standards.

Prospective employers, landlords, and utility companies may do a soft inquiry into your credit history to understand how responsible you are and determine the likelihood you’ll pay on time. This type of information can, for example, factor into whether you have to pay a deposit for utility services.

A hard inquiry is different. It does require your permission and typically is triggered by your active request (application) for a loan or extension of credit. When you apply for a car loan, student loan, or home loan, the creditor will pull your credit to evaluate your eligibility. In a hard inquiry, the lender looks at your credit score as well as all relevant details of your credit history to determine your credit worthiness.

Hard inquiries do have an impact on your credit score, because it shows you are actively seeking new credit. How a hard inquiry affects your credit score likely depends on individual circumstances. While a hard inquiry likely has a limited impact on your credit score; how it affects your credit score will also depend on your individual circumstance. You may still want to minimize the number of hard inquiries into your credit report.

The largest factors determining your credit score are payment history and amounts owed. Read our article, “Why Good Credit is Crucial,” to learn more about your credit score.

So, next time you look for a loan prequalification or a rate quote, it will be nice to know soft inquiries generally have no impact on your credit score (read the fine print to make sure it’s a soft inquiry). Once you formally apply for the loan, just know the creditor will have to make a hard inquiry into your credit and review your credit history in much greater detail.

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