When you apply for a new credit card or loan, the bank will typically perform a credit inquiry. That’s not the only time you undergo a credit inquiry, though. Inquiries also occur when you request a credit limit increase, for example, or a copy of your credit report.
However, not every credit inquiry is the same. There are two different types of credit inquiries, and only one of them affects your credit score.
Here’s what to know about the differences between soft credit inquiries and hard credit inquiries, how they can impact your credit, and how long they stay on your credit report.
Related: How to check your credit score for free
A credit inquiry is simply a look into your credit file. There are two different types of credit inquiries — hard and soft — that each affect your credit differently.
Credit inquiries often come from creditors or lenders when you apply for a new credit card or loan, but checking your own credit report is also a type of credit inquiry. Credit inquiries are made through the credit bureaus, which include Equifax, Experian, and Transunion.
The information a lender might see when performing a credit inquiry includes a listing of your accounts, opening dates, payment history, credit limits, account balances, and more. Your credit report also includes personal information such as your current and previous addresses and current and previous employers.
Hard inquiries typically occur by lenders (with your consent) when you apply for a new loan or line of credit. That may include everything from new credit card accounts to auto loans, student loans, mortgages, and other types of loans. These requests to see your credit file help banks and other financial institutions make decisions about your application, set interest rates, determine credit limits, and more.
This is the most impactful type of inquiry for your credit. Depending on the credit scoring model, a hard inquiry could reduce your credit score by up to five points. Hard inquiries do not stay on your credit report forever though, and their impact is temporary.
A soft inquiry doesn’t affect your credit score. Soft inquiries can occur when an issuer prequalifies you for a credit card offer, when you check your own credit report, when lenders review the credit history of existing customers, and more.
Banks often use soft inquiries to determine future credit increases and to offer additional products. They may also use this information to change interest rates, reduce credit limits, or close an account if the customer’s credit situation has deteriorated. When checking your own credit report, a soft inquiry allows you to find any errors, verify your accounts, and track your own payment and account history.
Prequalification is another common reason for soft credit inquiries. This can include when you receive a prequalification offer in the mail or you request prequalification on an issuer’s website. However, if you are preapproved and then apply for the card, you’ll still undergo a hard credit check.
Credit inquiries typically stay on your credit report for up to two years.
For hard inquiries, the impact on your score erodes over time. While the record of an inquiry remains on your credit report for two years, the impact on your credit score is typically the greatest for the first six to 12 months. In fact, FICO scores only consider inquiries made within the past 12 months.
Hard credit inquiries generally only affect your credit score by fewer than five points. That’s not much for a single inquiry, but multiple inquiries within a short period of time can make you look like a risky applicant — and less likely to get approved or qualify for the best terms. By minimizing the number of credit inquiries, you’ll maintain a solid credit score and increase your approval odds.
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Apply for credit cards matching your credit profile. Know your credit score before you apply for any new credit card so you can make sure you’re applying for cards you’re more likely to qualify for. For example, if you have no credit history, you’ll have much better chances of getting approved for a student credit card or secured credit card than a premium travel rewards card.
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Boost your credit score before applying for credit. Improving your credit score before applying can help you meet your desired card’s minimum credit score requirements. Start by reviewing your credit report for errors, paying down credit card balances, and making all of your payments on time.
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Get pre-qualified for a new credit card. Many banks offer prequalification to help you check your chances of getting approved for a card. With prequalification, your credit is not affected until you apply for the card.
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Don’t chase every “deal.” Credit card offers change throughout the year. Instead of chasing the latest offer, focus on earning the rewards that match your goals and spending. You can maximize your rewards and your credit over time by finding a card that fits your budget and financial plan long-term.
Knowing when soft vs. hard credit inquiries are most commonly used can help you stay prepared and reduce any negative effects on your credit score. Here’s a rundown:
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Checking your own credit report
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Prequalification offers
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A lender checking existing customers’ credit
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Credit checks from potential employers or when renting an apartment (this may vary)
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New credit applications
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New loan applications (includes personal loans, student loans, mortgage loans, car loans, etc.)
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Requesting a credit line increase on an existing card
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Responding to a prequalification offer by applying for the card
Too many hard inquiries can have a temporary negative effect on your credit score, but there isn’t a specific limit to the number of hard inquiries you should have on your credit report. To limit the effects of hard inquiries, don’t apply for several new lines of credit within a short time period, and consider how likely you are to qualify before you apply.
No. Checking your own credit is considered a soft inquiry, and will not appear on your credit report. You can check your credit score as often as you’d like without any impact.
Hard inquiries can reduce your credit score by up to five points. However, the impact varies based on your individual credit history. Soft inquiries do not affect your score, no matter how many soft inquiries are on your credit report.
If there’s a hard inquiry that you did not authorize, you can dispute it. Disputing unknown inquiries, accounts, and addresses in your report reduces fraud and can improve your score. It’s smart to regularly check your credit report so you can catch any potentially fraudulent changes.
This article was edited by Kendall Little
Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn’t include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.
