What Is a Credit Inquiry?

A credit inquiry is basically a record of someone checking your credit report, and it is sometimes called a credit check or a credit pull. There are two different types of credit inquiries: hard inquiries and soft inquiries.

• Hard credit inquiries are done by lenders when evaluating your application for a loan or line of credit. Hard inquiries can damage your credit score, especially in large numbers over a short time frame.
• Soft credit inquiries aren’t related to an immediate credit decision and don’t affect your score. They can actually occur without your knowledge or involvement.

What’s the Difference Between a Hard Inquiry and a Soft Inquiry?

A hard inquiry can hurt your credit score and occurs when a lender evaluates your application for a loan or line of credit, while a soft inquiry happens for other reasons and does not affect your credit score. You can learn more about the differences below.

Hard Inquiries vs. Soft Inquiries

Situations That Can Result in a Hard or Soft Inquiry

It’s also important to note that some situations could result in either type of inquiry, such as when you:

• Rent an apartment: A landlord will often check your credit in order to determine how risky you’d be as a renter. If you’re late on your credit card payments, for instance, that doesn’t reflect well on your ability to pay rent on time. The good news is that landlords use soft credit inquiries more often than hard.
• Lease a car: Although leasing a car is less of a financial commitment than buying one, dealers still naturally need information on your ability to make your monthly payments. Hard credit inquiries are more common than soft pulls when leasing cars.
• Open utility accounts: Utility companies will sometimes, but not always, run a credit check to see if you have a history of timely payments. If your credit history shows a lot of late payments, they might ask for a deposit or for someone else to give a “letter of guarantee” promising to pay your bill if you can’t. Utility companies typically only do soft credit pulls.

Request a higher credit limit: When you request a credit limit increase, your credit card company will check your credit to make sure you can handle the increased spending power responsibly. Whether you’re subject to a hard or soft credit inquiry depends on the issuer.

How to Dispute Credit Inquiries

Since hard inquiries have a direct, negative impact on your credit score, you should always ensure those listed on your credit reports are accurate and were authorized by you. If there is anything incorrect, you should dispute it as soon as possible. You can do so in a few easy steps.

1. Access your credit reports. Check your credit report from each of the three major bureaus every few months at annualcreditreport.com. You used to only be able to get one free copy of each report per year, but now you have permanent access to free weekly reports, so checking them often is worthwhile.You can also check your TransUnion credit report for free, updated daily, here on WalletHub. After all, there’s a lot you could miss waiting even one week.
2. Look for unauthorized inquiries. Check to see if there are any hard inquiries on your credit reports from companies that you did not authorize to check your credit.
3. Contact the company. Contact the company that made the credit pull and confirm with them that you did not authorize it. Assuming the inquiry is an error, ask the company to notify the credit bureaus that it is wrong.
4. File a dispute with the credit bureaus. If the company that made the inquiry is unable or unwilling to fix your issue, file a dispute with each credit bureau whose report the inquiry appears on. You can file online, by phone or by mail.
5. Wait for an answer. You should typically hear back within 30 days of filling your dispute. Assuming the dispute goes in your favor, the incorrect inquiry will be removed from your credit report.
6. File a complaint with regulators. If the credit bureau finds that the credit inquiry is valid but you are convinced it is not, you can escalate the dispute by filing a complaint with state regulators, the Federal Trade Commission or the Consumer Financial Protection Bureau.

You can learn more from WalletHub’s guide on how to dispute credit report errors.

What Kind of Credit Inquiry Has No Effect on Your Credit Score?

The kind of credit inquiry that has no effect on your credit score is a “soft” credit inquiry, sometimes called a “soft pull.” Soft inquiries still appear on your full credit report, but you will not see any damage to your credit score because of a soft inquiry.

Soft inquiries can occur when you are:

Checking your own credit. If you request to view your credit score or report from either the credit bureaus or a credit monitoring service, it generates a soft inquiry.

Requesting loan prequalification. A lender checking whether you are prequalified for a loan will do a soft pull on your credit.

Buying an insurance policy. In most states, insurance companies do a soft credit check, and they may use the information listed in your credit report when calculating your insurance premium.

Setting up utilities. When you move to a new home and are setting up the utilities, the utility company may run your credit to see whether they will request a security deposit before providing services to you. This generates a soft inquiry.

Applying for a job. Some employers may do a soft credit check on potential hires as part of their screening process.

Getting a promotional offer. A company, such as a credit card company, may do a soft pull on your credit to see if you qualify for a promotional offer.

Renting an apartment. Landlords run a credit check on potential renters to see how financially responsible they are and the likelihood of them paying rent on time. The credit check can either be a soft or hard inquiry, so it’s a good idea to confirm beforehand.

Comparing loan rates in a short period of time. If you get multiple inquiries within a 14- to 45-day period when you are shopping around for a car loan, student loan, or mortgage, it will typically only count as one inquiry instead of multiple. The one inquiry will be a hard one, but since it is only a single inquiry, it will have little impact on your credit score. It’s also important to note that FICO ignores inquiries made in the previous 30 days when calculating your score, so rate shopping won’t affect your chances of getting approved.

You can learn more from WalletHub’s guide on soft inquiries.

Tips for Minimizing Credit Score Damage

Whenever you apply for a new credit line or loan, your credit score will inevitably take a small hit from the issuer’s hard inquiry. Nevertheless, there are steps you can take to minimize the impact.

Take Advantage of “Rate Shopping”

The newest credit-scoring models all group together certain types of hard inquiries made within a defined time period. For example, VantageScore credit scores consider all inquiries made by mortgage companies in a 14-day period to be a single inquiry. The same is true of inquiries made by auto lenders, student loan providers and utility companies. The most recent model from the Fair Isaac Corporation (FICO) similarly groups such inquiries added to your file in the 45 days before scoring.

The bureaus do this in recognition of the fact that most consumers compare a handful of different offers when picking a financial product. So if you are looking for a loan, it’s best to plan your shopping strategically.

Be Selective With Credit Cards

The “rate shopping” perk does not apply to credit cards, so do not blindly apply for them in large batches (as each of them will count as its own inquiry). Instead, do your research and be selective in deciding which offer you’ll apply for.

Improve Your Credit History

Your credit score will be less susceptible to the temporary damage associated with hard inquiries if you have a solid base to begin with. That means a long track record of on-time payments and reasonable credit utilization. So, the best thing you can do to mitigate inquiry damage is to habitually give your credit standing some TLC.

Use a Soft Inquiry

Whenever there is a situation where an inquiry is required but it is ambiguous as to whether it will be a soft or hard pull, it won’t hurt to ask if you can do a soft credit check instead. For instance, if you are leasing a car, ask if you could pull a copy of your own credit report, print it out and pass it onto them in lieu of a hard credit check.

Find Other Ways to Prove Your Financial Reliability

Under circumstances where a hard inquiry isn’t routine, check to see if alternative forms of proving financial responsibility are accepted. For example, if you’re renting an apartment, ask your landlord if you could perhaps pay your rent a few months in advance, put down a larger deposit, show documentation of income or print out copies of your bank statement instead being subjected to a credit inquiry.

Timing Is Important

You can’t stop a hard inquiry from affecting your credit score, but you can time it so it doesn’t affect your ability to receive the best possible terms on loans. In other words, you can alleviate the negative consequences of hard inquiries by timing them so they don’t occur within six months before an important loan request. After all, you want your credit score looking its finest so you can receive the best interest rates.

Ask the Experts

To learn more about hard and soft credit inquiries as well as how consumers interact with them, we posed the following questions to a panel of personal finance experts. You can check out their bios and responses below.

1. What percentage of people would you say are afraid of checking their own credit scores and reports for fear of a damaging inquiry?
2. Do you think most people know the difference between “hard” and “soft” credit inquiries?
3. What is the biggest mistake that people make with regard to credit inquiries?
4. What is your best piece of advice regarding credit inquiries?

Ask the Experts

Larry Schrenk
Assistant Professor of Finance in the College of Business at Winona State University
Read More

Soumen N. Ghosh
Professor of Economics, Tennessee State University
Read More

Larry A. Connatser
Assistant Professor and Extension Specialist, Financial Management, Virginia State University
Read More

Larry R. White
John H. Poteat Chair of Banking, Professor of Finance, and Director of the Center for Banking, College of Business and Technology, East Tennessee State University
Read More

James Philpot
Associate Professor in the Department of Finance and General Business and Director of the Financial Planning Program at Missouri State University
Read More

Jaycob Arbogast
Coordinator, Center for Excellence in Finance, California State University, Chico
Read More

More Experts