Understanding how credit works may feel impossible.
A great place to start is by learning the difference between a hard and soft credit inquiry. We’ll give you all the ‘deets below.
Important Note
Before we dive in, we want to note that credit inquiries are also often referred to as “credit pulls” or “credit checks.” In this article, we’ll refer to them as “credit inquiries.”
What is a Hard Credit Inquiry?
A hard credit inquiry occurs when a financial institution checks your credit report when making a lending decision. For example, this may happen if you decide to apply for a mortgage, credit card, or student loan.
When doing a hard credit inquiry, lenders are attempting to assess how you have handled your credit in the past. This can include how you’ve managed your debts, whether you’ve made payments on time, or if you seem to have fumbled your way through paying your debts.
To a lender, each new credit application indicates a potential new debt. Thus, your credit score may temporarily drop after a hard inquiry.1 Don’t panic, though. FICO says hard inquiries typically only lower credit scores by 0-5 points. Generally speaking, one hard inquiry won’t cause too much trouble, but several hard inquiries could. (We’ll touch on this below.)
This hard inquiry will remain on your credit report for up to 2 years. Generally, this doesn’t bring down credit scores the whole time. For people that keep up with their debt payments, credit scores tend to come back up within a few months.
What is a Soft Credit Inquiry?
A soft credit inquiry occurs when an individual or company checks your credit as part of a personal curiosity or background check. For example, this may happen if you decide to check your credit score or if an employer checks it before hiring you.
Because these inquiries are not associated with a new potential debt, they will not impact your credit score in any way. Unlike a hard inquiry, a soft inquiry will only be visible to you in your credit report.
How Many Hard Inquiries is Too Many?
How much a hard inquiry impacts your credit score is dependent on your credit health. Lenders see multiple credit applications in a short timeframe as a sign of risk.
Think of it this way: If you applied for 10 credit cards in a one week span, something might be off. It could indicate a need for additional credit, a lack of secure funds, or an inability to pay off other debt. To lenders, this isn’t ideal.
Thus, one or two hard inquiries likely won’t have too much of a hit on your credit score, but having several in a short amount of time likely will.
There are some exceptions to this. For example, having hard inquiries from a mortgage and student loan at the same time likely won’t hit your credit score as hard as if you applied for 10 credit cards in the span of 3 weeks.
So, there isn’t a finite number of hard inquiries that is considered “too many.” Rather, you should try to think about what the hard inquiries are for and how that makes you appear as a potential borrower.
Can You Remove Hard Inquiries?
You can only remove hard inquiries in certain circumstances.
First, you should check your credit report from all three bureaus at least once a year. You can do this for free at AnnualCreditReport.com. (Remember: Because this is a soft inquiry, it won’t impact your score to check it!) Understanding your credit score and where it’s at is the first step to bringing it up.
When looking at your credit report, try to make note of any hard inquiries that don’t seem to make sense. While uncommon, there could be hard inquiries you don’t recognize, and of course, you would want to dispute those.
If you do see one you don’t recognize, reach out to the respective creditor. You should be super careful when it comes to sharing credit information over the phone or online with someone. Always use the contact information in the credit report. This will ensure that the creditor you call is actually who they say they are.
The creditor will then be able to verify the unfamiliar hard inquiry. Oftentimes, it is simply from something we forgot, but it doesn’t hurt to verify it. If the hard inquiry does end up being a result of fraudulent activity, you can:
- Report it to law enforcement
- Enact a fraud alert or security freeze with your creditor
- Dispute the inquiry to have it removed from your credit report
Why Your Credit Score Matters
Your credit score is a large part of your financial wellness, and it takes some time to build. Monitoring changes in your credit score helps you manage it better and keep your score as high as possible.