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‘Soft’ vs. ‘Hard’ Credit Inquiries: What’s the Difference?

Business credit

‘Soft’ vs. ‘Hard’ Credit Inquiries: What’s the Difference?

Updated: Feb 5, 2020

‘Soft’ vs. ‘Hard’ Credit Inquiries: What’s the Difference?

Knowing the difference between a hard inquiry and a soft inquiry on your credit report is important. A hard inquiry can affect your credit score, which in turn can change the interest rate you qualify for on a loan. A soft inquiry, although visible to you on your credit report, will not be shown to lenders; it has no effect on your score.

Soft Inquiries

When you request your own credit report and credit score, it is considered a soft inquiry. So are inquires associated with pre-approved credit card offers, applications for business credit, and background checks. If a company you hold an account with does a routine credit review, this will also fall into the category of soft credit pulls. A routine review may lead to a lender increasing your credit limit without you having to ask.

(NOTE: Bond Street makes soft inquiries; our review will have NO impact on your credit report)

Hard Inquiries

When a lender requests a copy of your credit report after you’ve submitted an application for a personal loan or a credit card, it is typically a hard inquiry. Once made, hard inquiries can remain on your credit report for up to two years. When another lender views your report, your prior credit application will be visible; it may be taken into consideration in the review of your new application.

Hard enquiries can lower your credit score – especially if you have multiple inquiries within a short amount of time – as it may be evidence of your inability to qualify for credit, or your desperation for a loan. Credit Karma, a credit-monitoring site, suggests keeping the number of hard inquiries to two or less a year.

Although it is not always the case, there are several other instances that may incur a hard inquiry. If you are worried that any of the following may affect your credit report and score, ask if the request will be a hard or soft inquiry, before granting permission for the institution to check your credit.

Hard inquiries may occur in the following instances:

  • A credit check as part of a rental application for a house or apartment
  • Identity verification for a financial institution, i.e. a stock brokerage or credit union
  • Car rental
  • Opening an internet or cable account
  • Requesting an increase to your credit limit
  • Taking on a new cell phone contract
  • Opening a savings, checking or money market account

If your credit is in good condition, the impact of a hard inquiry will be minimal. Hard inquiries are normal when you apply for a mortgage or other types of loan; the goal should not be to eliminate these inquiries altogether. If you find a hard inquiry on your credit report that occurred without your permission however, and you’re fairly certain it’s affecting your credit score, you can dispute it by calling the lender directly.

Michael Jones

Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.

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