The Difference Between Hard and Soft Credit Inquiries

Let’s admit it: credit can be confusing. Sure, you can do everything in your power to assure that your credit report is in tip-top shape, but there are still unforeseen factors that end up dooming your cause. For example, have you ever heard of the different between a soft inquiry and hard inquiry?

If you haven’t, I suggest you read some of the details below. When it comes down to it, the best way you can protect your credit is by being vigilant and smart. How do you acquire these two attributes? You want to be knowledgeable regarding the subject of credit, as ignorance won’t help much if you’re in some kind of legal trouble.

So say you recently learned that you have bad credit while you were applying for bad credit car loans in Cincinnati. The best way to improve your credit (and prevent this from happening in the future), is to learn about credit inquiries…

What’s the Difference?

It’s actually pretty simple to distinguish between a soft inquiry and a hard inquiry. Soft inquiries happen when someone (either a person or company) refers to your credit report as a background check. This includes checking your credit score online or getting pre-approved for a loan. These can sometimes happen without your permission, but this ultimately won’t have any affect on your credit score. In this case, since the credit-checker is simply telling you your likelihood for getting a loan, it’s considered “promotional.”

A hard inquiry is when a potential lender uses your credit report to base their decision. This is fairly common, as hard inquiries can occur when you’re applying for a credit card, car loan, mortgage loan… basically any type of loan. These can also happen when you apply to rent something (like a house or car), or even when your bank is simply trying to confirm your identity.

If you’re worried about your credit score being affected, simply call the company and ask which kind of inquiry will be made. If you feel a hard inquiry was made without your approval, dispute the decision with the credit bureau.

How Much Will a Hard Inquiry Hurt My Credit?

Luckily, it shouldn’t hurt much, but there are several factors to account for. As Jenna Lee of USNews.com explains, a brief credit history, lots of credit inquiries, or even having a low number of accounts could make a more drastic impact.

Furthermore, an abundance of hard inquiries on your credit report will set off a red flag to creditors. While you may have done nothing wrong, this could be an indication that you’ve either tried and failed to previously get your desired credit, or you’ve been absolutely desperate in your search.

Can I Avoid Hard Inquiries All Together?

Unfortunately, that’s impossible. If you’re going to apply for a credit card or loan, your creditor is going to do a hard inquiry.

Fortunately, if you’re shopping for a deal on a mortgage or auto loan, various credit scoring services will combine various inquiries into one. If you go down this path, be timely. These creditors will recognize your strategy, and they’ll often assign a deadline to make a decision.

Overall, as Lee reiterates, it’s the best idea to only apply for loans or credit cards that you’re confident in getting. Otherwise, the frustrating consequences could have an effect on your future finances.

If you have any questions regarding a loan, particularly when it comes to cars, visit McCluskey Automotive in Ohio.