Written by StephanieStephanie graduated in information systems with an emphasis in cyber security management. She enjoys spending her time hiking with her children and her dogs, and playing video games with her husband.
We hear about hard and soft inquiries all the time, but do we really know the difference? Does a soft inquiry count against you? How long does it take an inquiry to be removed? Does it really make that big of a difference? In this article we will discuss the difference between soft and hard inquiries, when each are used, and what you need to know about them.
Stop Losing Points to Hard Inquiries
The most notable difference is that one will count against your credit score, and the other will not. While five points may seem negligible, it can mean a world of difference for your future interest rates. If you are on the border of poor/fair credit, fair/good credit, or good/excellent credit, you could end up with worse rates due to a hard inquiry. Hard inquiries can also add up quickly. If you were to apply for several credit lines over the span of a few months, you could end up hurting your score significantly.
Experts suggest avoiding too many new credit lines, but if you do need to apply for new credit, it is best to apply to several places you are interested in within a two week period. Most of the time, all of the inquiries will be rolled up into one inquiry and cost you a total of five points.
If your credit score has suffered due to multiple hard inquiries, don't fret. Hard inquiries only count against your credit score for a year, and are completely removed after two years; however, it may be wise to check out your credit report for any discrepancies. The FTC found that 1 in every 5 Americans has an error on their credit report. If you feel that you are a victim of credit report errors, check out our top credit repair companies to see how they can help repair your credit score.
When Hard and Soft Inquiries Are Used
Another difference between soft and hard inquiries is when they are used, and by whom. Hard inquiries are typically used by lenders who you have applied to. They run your credit report to determine if you can be approved, and what your interest rates will be. Hard inquiries can be run by mortgage lenders, auto loan lenders, credit card companies, and personal loan lenders.
Soft inquiries are typically conducted by lenders you already have. A couple of reasons they may run your credit is if you ask for more credit, or if you ask for lower interest rates. Soft inquiries are also done by you when you check your credit report. Checking your credit report should be something you do every year to ensure that everything is accurate.
Both soft and hard inquiries are completely removed from your credit report within two years. While soft inquiries can be seen on your credit report, they do not count against you. For tips on how to raise your credit score fast, check out our recent article, 6 Ways to Raise your Credit Score Fast.