Understanding the distinction between hard and soft credit checks is crucial for anyone managing their credit. One of these can have an effect on your credit score, while the other will not.

When you apply for loans, credit cards, or even rent an apartment, you'll encounter references to 'hard inquiries' and 'soft inquiries' on your credit report. Although the differences might seem small, it's essential to know that one type could impact your credit score, and the other won't.

What does a soft credit inquiry mean?

A soft inquiry, also known as a 'soft pull,' happens when your credit is reviewed, but it's not related to applying for new credit or loans. These checks do not affect your credit scores. Common examples of soft inquiries include:

• Reviewing your own credit report

• An employer checking your credit history for job-related reasons

• Credit card companies reviewing your credit for special offers

• Lenders sending you pre-approved offers for credit

Since soft inquiries don’t affect your credit score, there’s no need to worry about how many of them appear on your credit report over time.

What does a hard credit inquiry mean?

A hard credit inquiry happens when a lender, credit card company, or other financial institution checks your credit report because you’ve formally applied for new credit or a loan. Examples of hard inquiries include:

• Applying for a new credit card, mortgage, auto loan, student loan, etc.

• Applying to rent an apartment or house

• Requesting an increase in your credit limit from an existing lender

Unlike soft inquiries, hard inquiries can cause a slight, temporary dip in your credit score, usually around five points or less. However, the effect fades as time passes and the inquiry ages.

Impact and limits of hard inquiries

Although a single hard inquiry typically won’t cause a significant drop in your credit score, it’s still a good idea to minimize them. Applying for multiple credit products in a short time can accumulate several hard inquiries, which could negatively affect your score. Most credit scoring models consider inquiries from the past 12 months when calculating your score. Additionally, if you apply for mortgages, auto loans, or student loans within a brief window (usually 14-45 days), these multiple inquiries may be counted as a single inquiry to accommodate rate shopping.

The key takeaway

Soft inquiries don’t affect credit scores, while hard inquiries can cause a minor, temporary dip in your score. Before applying for new credit, review your credit reports to monitor inquiries, and avoid unnecessary applications and credit checks when possible.