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Credit Monitoring

Hard vs. soft credit inquiry — what's the difference and how does it affect your credit?

Credit inquiries shouldn't be a problem as long as you're strategic about them.

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Azmanl | E+ | Getty Images

When you apply for credit, a lender is likely to check your credit file or, to use a more technical term, perform a credit inquiry. A credit inquiry is a lender's request to access your credit history to determine how responsible of a borrower you are.

Credit inquiries fall into two categories: soft credit checks and hard credit checks. They're triggered by different events and affect your credit differently. Below, CNBC Select explains how credit inquiries work and what you need to know about each type.

What is a hard inquiry?

A hard inquiry, also known as a "hard pull", occurs when a financial institution accesses your credit report to make a lending decision. Some instances where this may happen include applying for a mortgage, taking out a personal loan or getting a new credit card. Often, you may get hit with a hard credit check when applying to rent an apartment.

How much does a hard inquiry affect your credit score?

A hard inquiry appears on your credit report and might cost you a few credit score points. You can always check what hard inquiries you have on your report and get notifications about recent credit checks using credit monitoring services like Experian free credit monitoring and (if you're willing to pay for a more robust suite of features) FICO® Basic, Advanced and Premier.

Experian Dark Web Scan + Credit Monitoring

On Experian's secure site
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    Free

  • Credit bureaus monitored

    Experian

  • Credit scoring model used

    FICO®

  • Dark web scan

    Yes, one-time only

  • Identity insurance

    No

Terms apply.

FICO® Basic, Advanced and Premier

On myFICO's secure site
  • Cost

    $19.95 to $39.95 per month

  • Credit bureaus monitored

    Experian for Basic plan or Experian, Equifax and TransUnion for Advanced and Premier plans

  • Credit scoring model used

    FICO

  • Dark web scan

    Yes, for Advanced and Premier plans

  • Identity insurance

    Yes, up to $1 million

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A single hard pull might not affect your credit that much, but multiple inquiries within a short time period can take a greater toll. For instance, if you apply for several credit cards in the span of two or three months, the negative effect might snowball. Plus, lenders might see this as a sign you're financially struggling and scrambling to get access to as much credit as you can. That's why it's wise to space out your card applications by keeping at least six months between them.

This scenario doesn't apply to all types of hard inquiries, however. When you're rate-shopping for a loan such as a mortgage or a car loan, you'll have inquiries from multiple lenders. But as long as they occur within a short period (14 to 45 days), scoring models will treat them as a single credit pull.

How long do hard inquiries stay on your credit report?

Hard inquiries remain on your credit reports for two years but stop affecting your credit score after one year. You can check your credit report to see when an inquiry was performed. Looking through your hard credit checks is also a good practice since it allows you to check for potential fraud. If you see a credit inquiry that you don't recognize, it might be a sign someone has tried to take on debt in your name.

In case of credit report errors, such as an inaccurate hard inquiry, you can file a dispute with the credit bureaus. It might also be a good idea to look into freezing your credit and taking further steps to protect yourself against identity theft.

What is a soft inquiry?

A soft inquiry — or a soft "pull" — occurs when an institution receives limited information about your credit history as part of a screening process or to give you a promotional offer. Examples include prequalification for a loan, credit card or insurance quote. A potential employer might also run a soft credit check during a background check. Finally, when you check your own credit (which is a healthy financial habit!), it's also considered a soft inquiry.

Note that at times, it might be hard to predict what type of credit check an institution or company will conduct. When cable, internet and utility providers want to look at your credit situation, they might choose to do either a soft or hard pull. If you want to be sure, you can always ask them beforehand.

Do soft inquiries affect your credit score?

While you may be able to see soft inquiries on your credit report, lenders can't. Further, they have no effect on your credit score. For that reason, you can check your credit as often as you want using monitoring services without worrying about it tanking your score.

This also gives you the freedom to shop around for personal loans and other financial products by applying for prequalification. That said, remember that after you prequalify, you still need to get approved. Once you officially apply, the lender will still run a hard credit check.

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Bottom line

There are many instances when your credit file may be accessed, such as when you're applying for credit, getting a new job, or shopping for a loan such as a mortgage. When that happens, a credit inquiry may appear on your credit report. Hard inquiries can negatively affect your credit scores, but as long as you apply for credit sparingly and strategically, the effect should be minimal.

Catch up on CNBC Select's in-depth coverage of credit cardsbanking and money, and follow us on TikTokFacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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