How Soft and Hard Inquiries Could Impact Your Credit Score

Credit Report Showing Excellent Score

Your credit score could impact everything from whether you could qualify for a mortgage to whether you could get more credit. Perhaps your credit score is on the lower side because you have applied for several credit cards recently. That’s fine because you could try to practice better money habits. But before applying for more credit, you need to know how soft and hard inquiries could impact your credit score.

Soft Credit Inquiries vs. Hard Credit Inquiries

Inquiries take place when an entity checks out your credit report. During a hard inquiry, an individual will look at your credit report to verify whether you could qualify for credit. This typically occurs whenever you permit a creditor or lender see your credit report because you are applying for a credit card or some type of loan, explains the Altius Mortgage Group, a top mortgage lender in Utah.

Soft inquiries on the other hand usually occur when an entity needs to run a background check on you or if you want to see your own credit report. But unlike hard credit inquiries that can’t occur without your authorization, soft inquiries typically occur without you knowing about them. For example, if you receive multiple credit card applications, those sending them probably made soft inquiries beforehand.

How Credit Inquiries Affect Your Credit Score

Soft inquires won’t affect your credit score in any way even if you see them on your credit report. On the other hand, hard inquiries could reduce your credit score since a single application for credit equals one hard inquiry, which in turn could lower your credit score by five points.

Do note though that inquiries only remain on credit reports for about two years. And since the scoring model used by FICO only determines credit risk according to inquiries during the previous year and only account for 10% of your overall credit score, new inquiries won’t really do much harm on your credit score, unless you applied for several credit lines within a short period or you don’t have long credit history.

The Final Word

You shouldn’t be concerned with soft inquiries on your credit report. On the other hand, you should avoid having multiple hard inquiries on your report whenever possible. Otherwise, it could communicate to lenders that you’re a credit risk and find it hard to qualify for any loan in the future.