What’s the Difference: Hard vs. Soft Inquiries

You've heard someone say that inquiries on your credit score are bad. But without inquiries how will you ever get a job, a credit card, or a loan? Here's what you really need to know about inquiries. 

Soft inquiries

A potential employer says they need to check your credit as part of the background check and you have stress nightmares about plummeting credit scores for weeks. Sound familiar? Take a deep breath and relax. If a credit check isn't part of a pre-approval process for a lender, it's generally considered a "soft inquiry" and soft inquiries don't affect your credit score. When it comes to soft inquiries, you usually don't even know that it's happening. Think about the last time you shopped at your favorite store. Did they ask you if you wanted to open a store credit card? They already made a soft inquiry on your credit and preapproved you even before you got the offer. You'll probably get a soft inquiry from: 

  • A business where you already have a credit account 
  • Businesses who are making you an offer for goods or services (think the credit card, refinance, and loan offers you get in the mail). 
  • You check your own credit (so make sure you do it annually!)

Hard inquiries

You might not know when someone's making a soft inquiry on your credit, but you should know when someone's making a hard inquiry. That's because hard inquiries typically come after you've applied for credit with a business. So if you apply for a loan your lender will make a hard inquiry on your credit to decide whether or not to lend to you and what your interest rate should be. This type of inquiry is likely to knock a couple of points off your credit score. It typically won't be too damaging, but if you're in between a good and excellent score or if you have a lot of hard inquiries, it could have a negative effect. You'll probably get a hard inquiry if you apply for: 

  • Credit cards
  • Car loans
  • Mortgages
  • Student loans

Rate shopping 

Don't let the fear of the hard inquiry stop you from getting the best loan possible. You have 45 days to shop around for the best mortgage, car, or student loan rate and FICO will see all the inquiries made during that period as a single inquiry. Everyone knows a smart shopper shops around--and FICO is no different. Getting the best interest rates on your loan means you're that much more likely to pay your bills on time--so take full advantage of your 45 days! 

Remember, your credit score depends much more on how you handle your debts than it does on your inquiries. So, make sure you have a good idea what your score is and if you don't like it then take steps to change it.