The mystery of hard and soft inquiry and how to avoid one

Checking credit scores may be difficult at times. If there occurs a hard pull or a hard inquiry, your scores might fall down by a few points.

There is a division in the type of inquiry done on credit reports. They are soft inquiry and hard inquiry.

The possibilities of knocking out a good number of points from your credit score during an inquiry is actually minimal.

A "soft inquiry" is the one that only takes place during a normal scan of your credit report. This could be you, evaluating your credit score online, or while you get an offer for a pre-approved credit card.

A hard pull can drop down your score by some points. This is when banks, credit bureaus, employers and the big pop-pops of finance runs the check.

This "hard inquiry" is something you should be worried of.

So let’s get ready to tackle this fiend called credit inquiry.

What happens during a soft inquiry

Let's get one thing straight; a soft inquiry can by no means hurt your credit score.

Suppose you want to calculate your own credit score for personal satisfaction, you will then be making a soft pull on your report.

If a company or a creditor with whom you already do a business, check your credit report for any kind of work related verification, they make a soft pull with or without your permission.

You need not worry about soft inquiries. They keep happening every now and then. All of them should be under a header like ‘Inquiries made that did not affect your credit score’ or something similar on your credit report.

For example, sometimes you receive Emails regarding pre-approved credit cards. These offers are sent to you only after the lender or the company finds you creditworthy. They must have therefore ran through your credit report and did a soft pull in the process.

What you should take care of is hard inquiry instead.

What happens during a hard inquiry

This takes place when you apply for a loan or open a new credit account.

The company will straight away check your credit report and would evaluate a score based on your recent activities in the new credit section.

FICO gives an overall 10% for ‘new credit’ out of the total score.

How a hard inquiry affects your credit score is never revealed, but a normal prediction could be, it takes hold of the credit utilization ratio when a new credit is issued.

A hard inquiry done, stays on your report for a significantly long time, say around 2 years.

The main reason for a hard inquiry is, when you apply for any new credit, you unknowingly declare yourself as a potentially riskier borrower.

Now this declaration is something you can't avoid. So your application will only be approved if the credit bureaus got enough reason to trust your creditworthiness.

Due to so many undergoing processes of hard inquiry, it temporarily drops down a couple of points.

But the trick is whether you allow one inquiry or multiples of them.

Ways to avoid hard inquiries:

Credits that pull hard:

There are times when chances of both hard and soft inquiry are equal. So you must have a brief talk with your lender before you apply for any new line of credit.