A hard inquiry is a credit check tied to a credit application that can temporarily lower a credit score, while a soft inquiry, such as checking one's own credit, does not affect the score. The two appear differently on a credit file.
A hard inquiry, or hard pull, occurs when you formally apply for credit and a lender reviews the credit report to make a decision. Hard inquiries are recorded on the credit report and can lower the credit score by a small amount for a limited time, and many scoring models group similar inquiries made within a short shopping window so that rate comparison has less effect. A soft inquiry, or soft pull, occurs without a credit application, such as checking one's own credit, a prequalification, or a background review, and does not affect the score. Knowing which type a lender performs explains whether applying will appear as a hard inquiry.
A hard inquiry happens when a lender pulls a credit report because the consumer applied for credit. It appears on the report where other lenders can see it and can be a factor in some credit scores for a limited time. A soft inquiry happens when a report is pulled for reasons other than a credit application, such as checking your own report, prescreened offers or an account review by an existing creditor.
Some scoring models treat several inquiries for certain types of loans, such as mortgages and auto loans, made within a short window as a single inquiry. Consumers can see both kinds of inquiries on their own reports, although only hard inquiries are shown to lenders.
Consumers can also limit prescreened credit offers, which generate soft inquiries, by opting out through the nationwide opt-out service the credit reporting companies run. Opting out does not stop a consumer from applying for credit; it only reduces the prescreened offers that arrive in the mail.
An example
A consumer checks their own credit report online, which is a soft inquiry that lenders do not see. The following week the consumer applies for an auto loan at two dealerships, and each lender pulls the report, creating hard inquiries. Because both applications were for the same kind of loan within a short window, some scoring models count them as one.
Common misconceptions
Myth: Any time someone looks at your credit, your score can drop.
In fact: Soft inquiries, including checking your own report, are not factored into credit scores. Only hard inquiries can be.
Myth: A hard inquiry stays on your score forever.
In fact: Hard inquiries appear on a report for a limited period, and their weight in a score, if any, fades over time.
Myth: Prequalification always means a hard inquiry.
In fact: Many prequalification checks are soft inquiries. The lender can say which kind it uses before you agree.
What to check
- Whether a lender's check is a hard or soft inquiry.
- Whether prequalification uses a soft check.
- The inquiries listed on your own report.
- Whether you are comparing offers for the same kind of loan within a short window.
How this applies at Desert Rock Capital
Desert Rock Capital does not run a credit check, so no credit report is pulled when you apply. The review does not use a credit report or a credit score; it is based on your income and ability to repay, using the documents you bring.
Based on our loan requirements, loan amounts and application pages. Your actual terms are in the loan agreement.