Do Soft Inquiries Affect Credit Score?

How Are The Soft Inquiries Impact Your Credit Score?

Whenever you apply for a loan or credit card, the lending company will most likely pull your credit report to assist them in making their decision. These credit checks are known as inquiries. There are two categories of inquiries namely hard inquiries and soft inquiries. It is, therefore, necessary to know the difference between the two and how each of them impacts your credit rating.

What does it mean when someone says that a credit check was performed on a candidate with a soft inquiry?

A soft credit check or soft pull is when someone accesses your credit report but may not be thinking of lending you money. Common reasons for soft inquiries include.

• Pre-screened and pre-approved credit card offers – When a credit card company sends you an offer to apply, they have already pre-screened your credit report and approved your application. This is an example of a soft search.
• Potential employers – Some employers conduct credit checks on their prospective employees to determine their level of responsibility. It becomes a soft inquiry as long as the applicant approves of it.
• Your requests – If you are ordering a copy of the credit report to see whether there is any mistake or to keep an eye on your credit, the request does not harm your score.

The important thing to know here is that soft inquiries are only visible to you and have no impact on your credit rating in any way.

What Exactly Causes a Hard Inquiry?

A hard inquiry takes place when you apply for credit or a loan, and the lenders pull your credit report to assess your creditworthiness. This encompasses credit card applications, mortgage applications, auto loans, personal loans, and many others. This action leads to hard inquiries when the lender is required to assess the creditworthiness of the loan.

On the other hand, with soft inquiries, hard ones are visible on credit reports, and lenders can view them when they apply for credit. Also, they can have a short-term effect on your credit rating. In most cases, one or two hard inquiries from credit applications will reduce your score by a few points only. Nevertheless, multiple hard inquiries within a short period can be viewed as a greater risk by lenders and have a more significant impact. However, the effects of hard inquiries are not permanent; still, they remain on your credit report for two years.

Why are Soft Inquiries Significant?

Soft inquiries do not affect your credit score but are useful regardless of whether you receive a car loan or not. Monitoring soft inquiries can help you in a few ways.

1. Prevent fraud – If some unfamiliar nodes appear in your list of inquiries, then this can be a sign of fraud or identity theft. It is advisable to act quickly if you notice any suspicious activity since it can reduce the impact on your score.
2. Review other credit-related inquiries - Soft inquiries are often associated with pre-approved credit solicitations. It allows you to see where you can apply for new credit accounts and what rates you may be able to get.
3. Monitoring your credit – Soft inquiries are made every time you pull your credit score. This has the added benefit of alerting you when and how often you have been viewing your credit.

Tips for Managing Inquiries

Both the hard and soft credit inquiries should be effectively handled for the credit score to be improved and protected. Follow these best practice tips.

• Use the same time frame for applying for loans – if applications are made over months, each credit check will affect the score individually. However, if you have shopped for auto, mortgage, or student loans within 30-45 days, then most of these will be considered as one.
• Do not open too many accounts within a short period – Every time one applies for a credit card, a job, or a loan a credit check is done and this lowers your score a little. This is very risky because it is like opening too many new credit accounts at the same time and makes you look like you are in desperate need of credit.
• See soft inquiries activity timeline – They help to track credit activity and any new unauthorized access.
• Reports should be checked frequently – Monitor all the reports to confirm their authenticity and detect fraud.
• Freeware does not cause damage and does not focus on inquiries – hard inquiries mean much less than maintaining good credit. Paying balances on time and maintaining a low credit utilization ratio.

The Bottom Line

Soft credit checks enable lenders, employers, and even you to access your credit report without affecting your score in any way. Do not apply for new credit that you do not need and open new accounts only to make purchases. The screening of all inquiries is useful to identify potentially malicious activity while also capitalizing on approved offers relevant to objectives. Just a few related hard inquiries when the critical applications are reasonable. However, do not be quick to provide your reports and Social Security number unless necessary and to the right people.

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