How Hard and Soft Inquiries Impact Your Credit Score

When we talk about credit scores, credit inquiries almost feel like an afterthought. Credit inquiries, or new credit, only contribute about 10% to your FICO score, so it’s easy to assume they aren’t a big deal.

But sometimes it’s the little things that ding your score just enough to knock you out of the excellent credit score range down into the good credit score range. This means a higher annual percentage rate or interest rate, so this costs you real dollars.

There are two types of inquiries you need to know about: hard inquiries and soft inquiries. Each type of inquiry has a different impact on your score.

When you apply for a credit card, the credit card issuer requests your credit report from one of the three major credit bureaus. A hard inquiry, also referred to as a hard pull or a hard credit check, means the lender reviews your report in detail to help determine your creditworthiness.

Here are more examples of situations that usually result in a hard inquiry:

Anytime a potential lender or creditor does a deep dive to assess how risky you might be, it’s usually a hard pull, and that has the potential to impact your credit score.

Unlike a hard inquiry, a soft inquiry only involves looking at your credit report at a high level. For example, your report might be checked to verify your identity or to see if you fit within a certain demographic for marketing purposes.

There are a variety of activities that result in a soft inquiry, which is also called a soft pull or a soft credit check. Here are examples of situations that usually result in a soft inquiry:

A hard inquiry might lower your score from zero to five points, depending on your credit profile. For example, the score considers how long it’s been since your last inquiry. I really can’t stress enough that the number of points lost, if any, varies based on an individual’s credit history. But it’s best to err on the side of caution and not apply for credit unless you have a true need to do so.

Fortunately, the FICO score recognizes when you’re rate shopping. For instance, if you apply for mortgages with four different lenders within 45 days, the FICO score counts this as only one hard inquiry. But note that some credit score versions, such as VantageScore and older FICO versions, only allow a 14-day window. For this reason, it’s best to handle your rate shopping in a very short time frame to be safe.

Well, yes and no. First, you can avoid it by being strategic with your money management.

Don’t apply for credit cards that you know you won’t qualify for. That’s a hard inquiry plus a rejection. Know where you stand on the credit score range. There are a multitude of free ways to find out if you have excellent or just fair credit. Many credit card issuers now offer a free score. It might not be a FICO score, but even educational scores give you an idea of where you stand.

There are also many credit score apps and free educational scores from websites. Educate yourself so you’ll make better credit decisions and avoid an unnecessary hard inquiry.

And do remember the rules about rate shopping for things like an auto loan or mortgage within a short amount of time. You can’t avoid one hard inquiry during this process, but you can minimize the negative impact on your score by taking a smart approach.

Now, there are a few credit card issuers that don’t do a hard inquiry on specific credit cards. These credit cards generally target those with bad credit. There are a few good options in this category, but you need to do your research and read the fine print carefully before getting a credit card that seems to guarantee approval regardless of your credit history.

Do keep in mind that these issuers do soft inquiries to confirm your identity. I’ve heard from consumers who still ended up with hard inquiries because the issuer had to do a deeper dive into the credit report to feel comfortable with the person’s identity. So keep in mind that a hard inquiry is still a possibility.

And if you are applying for a credit card or a loan from a major bank, then it will result in a hard inquiry. But you’ll get a credit card or a loan that you want, and if your score is high enough, it will have little impact (if any) on your creditworthiness.

Hard inquiries stay on your credit report for about two years, but the FICO score ignores these after 12 months.

But aside from your score, if you have many inquiries over a short period, you’ll start to look risky to a potential lender. This is especially a problem for those who have a short credit history. So spread out credit applications, and don’t apply for two or three credit cards at the same time.

Errors do happen, so if there’s a wayward inquiry on your report, take action as soon as you can. Get your free annual credit reports from the three major bureaus, and see which reports contain the inquiry that you don’t recognize.

You can dispute the error with the bureau (or bureaus) involved. Write a letter explaining the error and include a copy of your report with the error highlighted or circled. The bureau will investigate and respond within 30 days.

If it’s not a random error, then someone tried to open an account in your name. So stay on top of this until it’s resolved.