What Is The Difference Between A Soft And Hard Inquiry On Your Credit Report?
There are two fundamental types of credit report inquiries: soft and hard inquiry. Even though both kinds of inquiries allow you or a lender to see your credit report, yet only a hard inquiry can have negative effect on your credit score. The difference between soft and hard inquiry have been explained in detail below.
Soft inquiry normally takes places when an individual or a company runs a background check on your credit report. For example, your employer may run a background check on your credit report or your potential credit card issuer may check your credit score to see if you prequalify for a credit card you have applied for.
Your permission is not required for soft inquiry on your credit report. Though a soft inquiry can be recorded on your credit report, but it cannot affect your score. This means that you can check your credit score without worrying about any negative consequences.
A hard inquiry normally takes place when a bank or a lending institution, where you applied for credit, checks your credit report to make a decision about your eligibility. For example, a credit card issuer may run a hard inquiry on your credit report to make a lending decision. Remember, a hard inquiry takes place only when you formally seek a credit card, a loan or a mortgage.
The good news is that your permission is required before a hard inquiry is run on your credit report. A hard inquiry can decrease your credit score by some points and it will stay on your report for 2 years. However, the dent to your credit score will gradually recover with the passage of time and as you make timely payments.
It is natural to feel scary when applying for a loan, mortgage or credit card because there are chances for your credit score to be negatively affected. By knowing the difference between a soft and hard inquiry, you know exactly whether you need to run a soft or a hard inquiry on your credit report. The knowledge about soft and hard inquiry would also help you make informed decisions and avert excessive hard inquiries on your credit report. Before you apply for a credit card or loan, it is best to carry out a soft inquiry on your credit report.