Soft Inquiry vs Hard Inquiry: Key Differences& Impact

When you approach any financial institution for a loan and submit your application, they will inevitably check your credit score and review your credit history. It is an integral part of the application review process, and it is known as credit inquiry or credit pull.

The lenders review your credit history to understand if you have always maintained an ideal credit score, how you have handled the repayments in the past, and if you have any bad credit remarks. Based on their assessment of your credit report, they will make the decision whether to extend the loan to you or not. Also, they use the credit information to determine your eligibility, i.e., the maximum amount they are willing to lend.

Now, when it comes to credit inquiries, there are two types – hard credit inquiry and soft credit inquiry. And, in this guide, we do a full soft credit check vs hard credit check comparison to help you understand the difference between the two. Read on!

What is soft credit inquiry?

One of the most significant points of difference between a soft and hard credit check is that the soft inquiry is generally done for reasons unrelated to lending your money. A soft credit inquiry or soft pull is usually done merely to assess your credit report.

It is a standard credit check process done to determine whether you qualify for a specific credit card offer, pre-approved loan or an extension of the current credit limit. Another important aspect of a soft credit inquiry is that it does not have any impact on your credit score.

A soft credit inquiry generally happens for the following reasons:

• When you view your credit score, it is considered a soft credit inquiry
• Some lenders may do a soft credit check to present you with a pre-approved loan offer
• Financial organisations may do a soft pull to check if you qualify for promotional offers like an extension of credit, etc.
• Employers may do a soft credit inquiry as part of their pre-employment screening process

Generally, soft credit inquiries remain on your credit report for up to two years. However, they don’t appear in the same way as hard credit inquiries; they may appear under the customer disclosure section.

What is a hard credit inquiry?

A hard credit inquiry or hard credit check is usually done by financial organisations, like banks, NBFCs (non-banking financial companies) or credit card companies, to assess your financial condition and do a thorough check of your credit history before making a lending decision. within a short span, although Crif does not penalise the score on hard enquiry.

Depending on the credit and the type of loan you are applying for, the financial organisation may view one or all of your credit reports from major credit bureaus in India like CRIF High Mark.

A hard credit inquiry generally happens for the following reasons:

• When you apply for a new credit card. Each credit card application will trigger a hard inquiry
• All lenders do a hard credit inquiry when you approach them for a loan, whether it be a home loan, personal loan, education loan, etc.
• If you ask your credit card issuer to increase the credit limit on your card

Here is a quick review of soft inquiry vs hard inquiry.

Will checking your credit score result in a hard inquiry?

If you are wondering if a credit check will affect your credit score, the answer is NO. Also, checking your credit score will not result in a hard inquiry. Financial experts suggest that checking your credit score regularly is a good practice. It allows you to be aware of the changes in your credit score and also identify any potential issues or errors in the credit report that may damage your credit score.

Nowadays, many services offer free credit reports, allowing you to check your score without worrying about its impact. Keeping a tab on your credit score may also help you make better and informed financial decisions, and you may also know the exact areas of credit where there is room for improvement and find answers for how to maintain a good credit score.

Conclusion

Knowing the differences between soft vs hard inquiry is vital for managing your credit score and maintaining a good credit history. After all, a good credit score is a reflection of your financial well-being and creditworthiness.

Hard credit inquiries lower your credit score. However, the impact is temporary, and it will rebound after a few months. While soft credit inquiry does not hurt your credit score. You must focus on maintaining a good credit score and learn to manage hard credit inquiries. This will help you get your loan approved when you need it.

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