Soft vs. Hard Credit Checks: What's the Difference?

It's more than just the effect on your credit score

Beautiful woman doing finances at home
••• Drakula & Co. / Getty Images

A hard credit inquiry is when a lender checks your credit before approving you for a loan, such as a mortgage or car loan, or a credit card you’ve applied for. A soft inquiry happens when you receive an offer from a lender, like a pre-approved credit card, or when you check your own credit. 

But do you know why hard inquiries happen instead of soft inquiries? What about the differences between the two? How about whether an inquiry is going to be hard or soft before it happens or whether there are repercussions for either? Learn the similarities and differences between hard and soft credit checks and more.

What's the Difference Between Soft and Hard Inquiries?

 Soft Inquiries Hard Inquiries
Don't affect your credit score Affect your credit score
Done by creditors to provide preapproved offers Done by creditors and lenders when you apply for credit or a loan
Can be done without your consent Need to give written consent

Impact on Credit Score

Soft inquiries do not affect your credit score. While soft inquiries do appear on your credit report, only you can see them.

Hard inquiries lower your credit score by a few points, though that shouldn’t be a big deal in the long run. However, too many hard inquiries in a short period of time may give lenders the impression that you’re a high-risk customer.

Note

Hard inquiries stay on your credit report for up to two years, but they typically only affect your credit score for one year.

When the Inquiry Is Used

Soft inquiries are pulled on your credit all the time, e.g., when you receive a credit card offer in the mail, when a potential employer performs a background check, or when you check your credit.

While soft inquiries can occur without your knowledge, as in those preapproved credit card offers you receive in the mail, hard inquiries occur when you apply for a loan, credit card, or mortgage and the lender checks your credit history before granting (or denying) the loan.

Consent

As far as determining whether an inquiry will be hard or soft before it happens, you will likely know when a hard inquiry happens because you’ll have to give the lender consent.

For example, if you’ve ever bought or leased a car, you were asked to sign a credit report authorization form as part of the paperwork. By signing this document, you are giving the dealership’s financing department permission to pull your credit. In other words, you’re giving them the OK to perform a hard credit inquiry.

Note

While too many hard inquiries can make you look like you are a credit risk, rating agencies understand that several inquiries in a short period could be because you’re “rate shopping.” The agencies will group those inquiries, such as from several mortgage lenders if you’re home loan shopping, into a single hard inquiry on your report.

What to Do Before an Inquiry 

If you are worried about a potential hard inquiry and its effect on your credit score, you have a few options. First, before you apply for any sort of major loan, like an auto loan, a mortgage, or even student loans, ask the lender whether a hard or soft inquiry will be required to secure the funds.

Also, keep your hard credit inquiries to a minimum. You don’t want to undercut your credit score by applying for too many credit cards or other loans. Plus, overextending yourself from a credit perspective can hurt you financially.

You should also cross-check the hard inquiries you actually initiated with those that appear on your credit report to avoid credit card fraud. You can do so by getting a copy of your credit report at AnnualCreditReport.com.

The Bottom Line

While both soft and hard credit inquiries are performed to assess the state of your credit, hard inquiries can affect your credit score for a year and stay on your credit report for 24 months. That’s why it’s important to understand the difference between hard and soft credit inquiries, and when each is required.