When it comes to credit reports and scores it's easy to get confused, the entire process seems to be veiled in an air of mystery. So today we're tackling the topic of credit inquiries. There are two kinds of inquiries that lenders can use to determine your credit worthiness, a hard or soft inquiry. Both can be used by lenders, employers or suppliers to view your credit score, though only one can be used to make a credit decision.
What is a soft inquiry?
If you’ve ever received a credit card offer in the mail from a bank you’ve never done business with chances are they ran a soft pull on your credit. Soft pulls are also done when you view your own credit report, as part of an employee background check or when a landlord checks your credit as part of a rental application. Soft inquiries occur often without your permission, but don’t worry that won’t affect your credit score.
What is a hard inquiry?
A hard inquiry occurs when a vendor, supplier or lender needs to make a credit decision, such as when you apply for a credit card, mortgage, business loan or to finance a car purchase. A hard pull on your credit will affect your credit score and can only be done with your permission. The inquiry becomes a part of your credit and will be listed at the bottom of the report along with any other hard inquiries that have been done. Hard inquiries can lower your credit score and generally appear on your credit report for two years. If you have great credit and want to apply for a credit card to take advantage of a sign up bonus, then losing a few points due to a hard inquiry won’t be a big deal. But if you have borderline credit you may want to think twice before applying, especially if you plan on taking out a loan or mortgage in the near future.
How to remove a hard inquiry.
If there’s a hard inquiry on your credit report you didn’t give permission for or maybe a lender ran your credit twice, simply call or write to the company explaining that you didn’t authorize the inquiry and tell them you would like to have it removed. You can also file a dispute with each of the credit bureaus to have the inquiry removed.
If a company or financial institution lets you know they’ll be checking your credit be sure to ask them whether this will be a soft or hard inquiry. Some inquiries could be either a soft inquiry or a hard inquiry depending on the company and how they process the transaction.