A hard inquiry is when a prospective lender checks your credit report to make a decision. Hard inquiries can lower your credit score by a few points (five or fewer for most people) and typically stay on your report for two years. They are triggered when you apply for a credit card, auto lease, mortgage, or other loan.
In some cases, a hard inquiry may be worth it. For example, opening a credit card might initially ding your score a couple of points, but if you use it wisely and don’t accrue a huge balance, the increased available credit and better credit mix will benefit your score in the long run. It’s best to avoid hard inquiries when possible, but always be sure to weigh the pros and cons of your financial decisions. Sometimes a short-term dip is worth the long-term boost.
A soft inquiry, by contrast, is when a company checks your credit report as part of a background check. They don’t affect your credit at all, which is fortunate because soft inquiries tend to happen without your knowledge or permission. If a direct marketing campaign tells you that you’re “preapproved” for a loan or credit card, it signals that they may have pulled a soft inquiry to see if you are a good candidate for their product.
These also occur as part of pre-employment screenings in states that don’t restrict this. You can do yourself a favor by pulling your own soft inquiries from free credit report sites.
Soft inquiries don’t affect your score at all, and even hard inquiries typically don’t affect your credit score by much. Such factors as your payment history and Credit Utilization Ratio are weighed more heavily.
Q: Checking your credit score hurts your credit.
A: Myth! Checking your credit score does not hurt your credit, as this is a soft inquiry.
Improving your credit score is hard, but hurting it is easy. The following mistakes often lead to a declining credit score:
Your credit score rises with consistent, timely repayments of borrowed money.