Hard VS Soft Inquiries

Navigating the world of credit can sometimes feel complex. You hear terms thrown around – FICO scores, credit utilization, payment history – and one pair that often causes confusion is “hard inquiries” versus “soft inquiries.” Here at MSI Credit Solutions, we believe knowledge is power, especially when it comes to your financial health. Understanding the difference between these two types of inquiries, how long they impact you, and when to take action is crucial for managing your credit effectively.

So, let’s break it down.

What is a Credit Inquiry Anyway?

Simply put, a credit inquiry is a record created whenever someone accesses your credit report. Think of it as a log showing who looked at your credit history and when. But not all look-ups are the same, and crucially, they don’t all impact your credit score in the same way. This is where the “hard” vs. “soft” distinction comes in.

The “Hard” Truth: Hard Inquiries Explained

A hard inquiry (also known as a “hard pull”) typically occurs when you actively apply for new credit. When a lender needs to make a lending decision based on your creditworthiness, they will perform a hard inquiry.

• When do they happen?
  • Applying for a mortgage
  • Applying for an auto loan
  • Applying for a new credit card
  • Applying for some apartment rentals
  • Requesting a credit limit increase (sometimes)
• Do they affect your credit score? Yes. Hard inquiries can slightly lower your credit score, usually by a few points. Why? Because applying for multiple lines of credit in a short period can signal to lenders that you might be facing financial difficulty or taking on too much debt too quickly, increasing your risk profile.
• How long do they stay on your report? Hard inquiries typically remain visible on your credit report for up to two years. However, their impact on your credit score usually diminishes significantly after the first year, and often scoring models only consider inquiries from the last 12 months.
• The Impact: While a single hard inquiry usually has a minimal and temporary effect, numerous hard inquiries close together can have a more significant negative impact. However, scoring models often treat multiple inquiries for the same type of loan (like rate shopping for a mortgage or auto loan within a short window – typically 14-45 days) as a single inquiry to avoid penalizing smart shopping.

The “Soft” Side: Soft Inquiries Explained

A soft inquiry (or “soft pull”) occurs when your credit report is checked for reasons other than a direct application for new credit by you.

• When do they happen?
  • Checking your own credit report or score (using credit monitoring services, directly from bureaus, etc.)
  • Pre-approved credit card offers you receive in the mail (lenders check criteria)
  • Checks by your current creditors for account management purposes
  • Background checks by potential employers (with your permission)
  • Identity verification checks
• Do they affect your credit score? No. Soft inquiries have absolutely zero impact on your credit score. They are visible to you when you check your own report but are not visible to potential lenders reviewing your file for a credit application.
• How long do they stay on your report? Soft inquiries may also stay on your report for up to two years, but since they don’t impact your score and aren’t seen by lenders considering applications, their presence is informational for you only.

Why Does This Distinction Matter?

Understanding the difference is key for several reasons:

1. Score Management: Knowing that applying for credit generates hard inquiries helps you be strategic about when and how often you apply, protecting your score from unnecessary dips.
2. Monitoring Accuracy: Reviewing your credit report allows you to see both hard and soft inquiries. You can verify that the hard inquiries listed accurately reflect credit applications you initiated.
3. Peace of Mind: You can check your own credit score as often as you like without fear of hurting it, as these are soft inquiries. Staying informed is crucial!

Should You Dispute Hard Inquiries? (Know When and When NOT To!)

This is a common question, and the answer is nuanced.

• When NOT to Dispute: You should NOT dispute a hard inquiry if it resulted from an application you actually submitted. If you applied for that credit card, loan, or apartment, the lender had a permissible purpose to check your credit, and the inquiry is a legitimate, factual record of that event. Attempting to dispute accurate inquiries is generally unsuccessful and misdirects effort from genuine credit improvement strategies. Remember, these legitimate inquiries will fall off your report naturally over time.
• When TO Dispute: You absolutely SHOULD dispute a hard inquiry if you did not authorize it. If you see an inquiry from a lender you never applied to, or on a date you know you weren’t seeking credit, this is a major red flag. It could indicate:
  • Identity Theft: Someone may have tried to open credit in your name.
  • Lender Error: Mistakes can happen, though less common.
  • Mixed Credit File: In rare cases, someone else’s information could be mistakenly merged with yours.

  Disputing unauthorized hard inquiries is a critical step in protecting yourself from fraud and ensuring your credit report is accurate.

How MSI Credit Solutions Can Help

Your credit report tells a story, and inquiries are part of that narrative. At MSI Credit Solutions, we help our clients understand every aspect of their credit reports. We can:

• Help you obtain and review your credit reports.
• Analyze the inquiries listed, distinguishing between legitimate ones and those that might warrant investigation.
• Identify potentially unauthorized or incorrect hard inquiries and guide you through the dispute process with the credit bureaus if necessary.
• Develop a strategy to manage your credit applications wisely and improve your overall credit health.

Don’t let confusion about credit inquiries hold you back. By understanding the difference between hard and soft pulls, how long they last, and when a dispute is truly necessary, you take another step towards mastering your credit and achieving your financial goals.

Ready to take control of your credit story and ensure its accuracy? Contact MSI Credit Solutions today for a free consultation!