When you apply for a credit card, personal loan, auto loan, or mortgage, a lender may check your credit report. This process is known as a credit inquiry.
Credit inquiries generally fall into two categories: hard inquiries and soft inquiries. Understanding the difference can help you make more informed decisions when applying for credit and avoid unnecessary concerns about your credit score.
What Is a Hard Credit Inquiry?
A hard inquiry, sometimes called a hard pull, usually occurs when a lender or creditor reviews your credit report as part of a credit application.
Common situations include:
- Applying for a credit card
- Applying for a personal loan
- Applying for an auto loan
- Applying for a mortgage
- Applying for certain financing products
A hard inquiry may appear on your credit report and can have an impact on your credit score. The effect is generally limited, but multiple hard inquiries over a short period can become more noticeable depending on your overall credit profile.
What Is a Soft Credit Inquiry?
A soft inquiry does not generally affect your credit score.
Soft inquiries can happen in several situations, including:
- Checking your own credit report
- Prequalification checks by some lenders
- Credit card preapproval offers
- Background checks by certain employers
- Existing creditors reviewing your account
Because soft inquiries are not typically associated with a new credit application, they generally do not have the same scoring impact as hard inquiries.
Do Hard Inquiries Lower Your Credit Score?
A hard inquiry can cause a small, temporary change in some credit scores. However, the inquiry is only one factor used in credit scoring.
Your payment history, credit utilization, length of credit history, credit mix, and other information can have a much larger influence on your overall credit profile.
For this reason, one hard inquiry does not automatically mean that your credit score will experience a significant decline.
Multiple Loan Applications May Be Different
Consumers sometimes shop around for mortgage, auto, or student loans. Certain credit-scoring models may treat multiple inquiries for the same type of loan within a specific shopping period as a single inquiry for scoring purposes.
The exact treatment can depend on the scoring model and type of credit.
That means consumers should still compare lenders, but they should also understand how applications are handled before submitting multiple full applications.
How to Minimize Unnecessary Hard Inquiries
Before applying for a financial product, consider the following steps:
Check Your Credit First
Review your credit report and understand your current credit profile before submitting an application.
Compare Eligibility Requirements
Some lenders provide general eligibility information or prequalification options without requiring a hard credit inquiry.
Avoid Applying for Too Many Cards at Once
Opening several credit accounts in a short period may result in multiple hard inquiries and can also change the overall structure of your credit profile.
Research Before Applying
Review fees, interest rates, credit requirements, and other terms before deciding whether a particular product is appropriate for you.
Final Thoughts
Hard and soft credit inquiries are not the same. A hard inquiry is generally connected to a credit application and may affect your credit score, while a soft inquiry generally does not.
Understanding how inquiries work can help you approach credit applications more carefully. Before applying, review the terms, compare available options, and consider whether the new account fits your financial situation.