Have you heard of the phrase "pull your credit"? When you apply for credit – whether it’s a new cellphone contract, a vehicle or home loan, or a credit card, lenders/creditors will "pull your credit". This means that they will look at your credit report. There are also times when your potential employer, or landlord if you’re renting, will need to access your credit information. Both of these scenarios are inquiries, but there’s a difference: one is a hard credit inquiry and the other is a soft credit inquiry. But what exactly is an inquiry? We’ll help you to understand inquiries and the impact of your credit decisions during Lockdown. 

Understanding credit inquiries

When someone requests access to your credit information, it is called a credit inquiry. This process often involves you giving the creditor permission to perform the credit inquiry. The credit bureau would then share your credit report and any other credit information about you with the company to whom permission has been given. This is the information that creditors/lenders will use to determine whether they will grant you credit, a loan, contract, or even an apartment to rent.  These credit inquires can be either soft inquiries or hard inquiries. According to Transunion, the major difference between the two has to do with how the inquiry impacts your credit score. 

What is a soft credit inquiry?

Soft inquiries are routine checks that even you can do on your own to check your credit rating. They do not have any impact on your credit score. Unlike hard inquiries, they can be done without your permission. Most commonly, they are performed by companies for promotional purposes. Also known as soft pulls, common examples include: checking your free credit score, "pre-selected" loan offers and employment verification or background checks. 

What is a hard credit inquiry?

Unlike a soft inquiry, hard inquiries do affect your credit score. These are inquiries that a credit provider will conduct to assess whether or not they can approve credit for you. You do, however, have to authorise these types of inquiries. Also known as hard pulls, common hard inquiries include loan applications, vehicle finance applications, credit card applications, and student loan applications. 

Having too many hard inquiries in your credit report, especially in a short period of time, indicates to lenders that you might be a high-risk customer, or that you’re taking on too much debt. It’s therefore important that you don’t put in too many credit applications, especially within a short period of time. 

How long does an inquiry remain on your credit report?

Both soft and hard inquiries are visible on your credit report. Depending on the credit bureau, they can be visible for many months.

The next time you apply for credit, it’s important to think about the impact on your credit report. Download your free credit report here to check your soft and hard credit inquiries.

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