Is there a difference between hard and soft credit inquiries?


 

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Male Speaker:
This segment of Credit FYI is brought to you by FreeScore.com.

Carrie:
So we have a question from Eileen, which is what is the difference between a hard and soft credit inquiry, and when do they occur? Eileen, this is a very good question, because when we did a recent poll, what we learned is that only 26 percent of people knew the difference. Credit scoring companies monitor all inquires to your credit report, so whether it’s a potential employer looking at your credit report and credit score, or whether you’re going out and applying for a mortgage. So you want to make sure you understand the difference between these types of inquiries, and how they affect your credit score. So let’s take a look at the two; soft and hard inquiries.

Soft inquiries include you checking your own credit report and score, initial credit checks by companies that want to market lines of credit to you, background checks by potential employers, and periodic checks by your insurance companies and credit card issuers. Soft inquires do not affect your credit score. However, hard inquiries do.

Included in this category are applications for new loans and lines of credits, activating pre-approved credit cards, and even activating new cell phone contracts. Now, be aware, a lot of hard inquiries in a short period of time can call into question your financial wherewithal with potential creditors, so be careful about that. There is one exception, and that’s with mortgages. Obviously we know that when people get mortgages, they shop their rates, so there is some latitude for that. But try to keep it within a period of about a month or so; don’t stretch it out over too long of a period of time. A lot of people don’t know that. So the bottom line from Credit FYI is, select your credit wisely.

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