A credit inquiry is an inquiry that you or another person makes to review your credit report. This is done to take a closer look at your financial credentials and understand your financial behavior. Credit inquiries may be made by the account holder or by prospective creditors, lenders, employers or landlords. They may also be referred to as ‘credit pulls’ or ‘credit checks’.
There are two types credit inquiries – hard and soft. Understanding the differences between the two is important. These inquiries can affect whether or not you get approved for a loan. They can also affect the interest rate you pay if your loan request is approved.
A soft inquiry is essentially a preliminary credit screening. It occurs when you check your own credit. It may also be initiated by companies who periodically check your credit to determine if you qualify for an ongoing promotion. Lenders perform a soft credit pull to calculate your customized interest rate.
These are the most important things to know about soft credit inquiries:
A hard credit inquiry is performed to get a more detailed look at your financial credentials. It most commonly gets triggered when you apply for any financial product such as a loan, credit card, or mortgage. A hard credit inquiry shows your payment and loan history, credit score, credit inquiries, public records, and more. This information reveals a lot about your ability to repay your loan on time.
Lenders perform hard credit inquiries to finalize their loan approval decision and calculate your customized interest rate.
These are the most important things to know about hard credit inquiries:
In general, you must try as much as possible to limit the number of hard credit inquiries. One way to do this is to limit the number of credit cards and loans you apply for. Applying for financial products only when you absolutely need them is the best way to protect your credit score.
We hoped you enjoyed this article! Remember, you can
and potentially lower your monthly student loan payments and save money.