Soft Credit Inquiry

Introduction

When you apply for a credit card or financing or a mortgage the first thing a lender checks is your credit score. In this process what the lender does is called an inquiry. Now when it's an inquiry by a lender it is a hard inquiry or often called hard pull.

However, when a person or a company does an inquiry it is called a soft inquiry. There is a major difference between the two. Let us understand what a soft credit inquiry is and how it's different from a hard inquiry.

Soft Credit Inquiry: Definition

A soft credit inquiry is more or less like a background check on you. Even when you check your credit score, it comes under soft inquiry. Soft inquiry may also be done by your employer who is running a background check on you before hiring you. Moreover, it can also be done by banks to check your credit to issue a credit card or to check if you are eligible for one.

Soft Credit Inquiry: Explanation

Creditors or financial organizations often carry out a soft credit inquiry, also called a soft pull to check into your credit review and credit score. They are allowed to do that which gives them an idea about how you manage your credit. A creditor will be looking for information such as the number of late payments if you have any, your credit usage, meaning how much you have borrowed on each credit card, etc. By studying your credit review or credit score one can make out if you are a risky borrower or a potential client. When you decide to check on how you are doing with the credit score it is also reported as a soft inquiry.

Examples of Soft Credit Inquiry

Here are some situations wherein a soft credit inquiry is done −

• An employer running a background check

• Credit card companies checking your credit score

• Financial organization checking for pre-approval of loan

• You apply for soft inquiry to check your credit.

Benefits of Soft Credit Inquiry

• The most important benefit of a soft credit inquiry is that you can check your credit score or credit review. You can use the free credit reports that are offered by your credit card company.

• An assessment is offered by companies so that the cardholders can take a look at their credit profile and take necessary steps to either Improve or maintain the score.

• Moreover, legally you have the right to receive a free copy of your credit report every year from the bureaus.

• The credit report not only contains your credit score but also information as to which companies are considering extending your credit. That information can help you compare and choose what's best.

Will Soft Credit Inquiry Affect Your Credit Score?

The most common myth about soft Inquiries is that they affect your credit score and pop up in your credit report as it does in the case of a hard inquiry. Hard Inquiries stay on your credit report for almost 2 years and do have an effect on your credit score, however, that is not the case with soft Inquiries. Moreover, multiple hard Inquiries can have a greater impact on your credit report but not when there are multiple soft Inquiries.

Managing Soft Credit Inquiries

We know that the major difference between a hard inquiry and a soft inquiry is that a hard inquiry affects your credit score. However, another difference between the two is whether you are permitted to the inquiry.

Meaning, if you didn't permit the person who checked your credit score then that will be reported as a soft inquiry. But if the permission for inquiry was given then it will be noted down as a hard inquiry in your credit report.

Furthermore, if you want you can remove your Inquiries from the credit. To remove an unrecognized or unauthorized inquiry from your credit report you will need to contact the creditor of the credit bureau. The creditor will process the removal of the inquiry once you provide some kind of proof that the inquiry was unauthorized.

Conclusion

However, when you need to apply for a loan a hard inquiry will be requested to check into your credit score. If nothing negative is found in the check then the hard inquiry will not have a major effect on your credit score. In reality, soft Inquiries are a more reliable source to check your credit score. This is an advantage as you can keep track of your credit and take steps to improve or maintain it.

FAQs

Qns 1. Where will I find soft Inquiries on the credit report?

Ans. Under the subhead "soft Inquiries" or "inquiries that don't affect tej credit score", you can find the details of all the soft Inquiries which will also include who requested the inquiry and the date of inquiry

Qns 2. How to maintain a good credit score?

Ans. Hard Inquiries affect your credit score. If you want fewer hard Inquiries on your report then always be cautious about the type of inquiry that is made on your credit. Do not take loans that are not needed as this will lead to a hard inquiry

Qns 3. How can I get a free copy of my credit report?

Ans. The major credit bureaus like Experian, Equifax and TransUnion, each can provide you with a copy of your credit report. However, all three reports will have different Inquiries listed in the report. That is because an inquiry is added only in the report that is checked. So if you check your credit report of TransUnion then the soft inquiry won't be added to your Experian or Equifax reports.