What is a Soft Credit Inquiry?

Managing our credit scores and responsibly using credit is very important in our modern financial lives. Our credit score is important for many reasons. It affects our ability to get a loan or credit card, secure an apartment lease, and much more. 

Managing credit starts with understanding the basics of how it works. You may have heard terms like “credit pull” or “credit inquiry,” and wondered what these terms mean. You may even have heard about the difference between soft and hard credit inquiries.

What is a soft credit inquiry, exactly? And why does it matter? 

What is a credit inquiry?

A credit inquiry occurs when a lender or other third party requests your credit records from one of the three main credit bureaus. 

Your credit report contains information on your current loans and credit cards, including balances, credit utilization, payment history, and more. Credit reports are used by lenders to gauge your creditworthiness. If a lender sees that you are responsibly using credit, they are more likely to extend you a loan. 

Credit inquiries are requested any time you apply for a loan. These are typically hard credit inquiries.

What is a soft credit inquiry (“soft pull”)?

When a lender pulls your credit, it will usually be a “hard pull” or hard credit inquiry. So what is a soft credit pull? 

A soft credit check occurs when you or someone you authorize (like a potential employer) checks your credit. A soft inquiry is not attached to a specific credit application, however. 

For example, if you pull your own credit report, that will be a soft pull. If a landlord pulls your credit, that will also be a soft pull. But if you apply for a credit card, the lender will conduct a hard pull to request your entire credit report. 

Soft credit checks can also occur when an existing lender checks your credit report again. They may also occur if you attempt to become “prequalified” for a credit card or other loan product.

Soft credit inquiries do not affect your credit score. Hard inquiries, on the other hand, will have a temporary negative impact on your FICO® Score. 

Soft vs. hard credit inquiries

In some cases, you may not know if the inquiry will be soft or hard. For example, when you open a bank account, the bank will likely check your credit — but it could be a soft or a hard pull. The same is true when you apply for a home lease. 

In these cases, it’s wise to ask the third party whether it will be a hard or a soft credit pull. Remember, hard pulls can affect your credit score temporarily, while soft inquiries do not. 

How can inquiries affect credit?

Soft credit inquiries do not affect your credit score. They are not attached to any particular application for credit, so lenders do not see them as risky.

Hard credit inquiries, on the other hand, are directly associated with a specific application for credit. For this reason, they can be viewed as risky for lenders. If a lender sees several recent hard pulls on your report, they may be more hesitant to extend you credit. 

Soft inquiries don’t affect credit — but it’s wise to understand the factors that docontribute. Your credit score is calculated using a variety of factors:

• 35% payment history: Whether you’ve made on-time or late payments, number of payments made, etc. 

• 30% amounts owed: The total amount you owe, plus the percentage of your available credit that you are using. This is known as credit utilization. Most credit experts recommend you keep your credit utilization below 30%.

• 15% length of credit history: The average age of all your open accounts. If you open a new account, that will shorten your average age — as will closing an old account. 

• 10% credit mix in use: The variety of credit types (credit cards, loans, mortgages, etc.) that you are using or have used. 

• 10% new credit: The recent accounts or loans that you have opened. Too many new accounts may be seen as risky for the lender. 

Soft inquiries will still show up on your credit report, but they won’t affect your credit score. 

How to manage your credit score and the effect of credit inquiries

You do not need to worry about soft credit inquiries affecting your credit. Hard inquiries can have a negative impact, however. If you are unsure whether an inquiry will be soft or hard, it’s wise to ask the third party beforehand.

There are other ways to manage your credit score, as well:

• Only applying for credit when necessary: By avoiding unnecessary applications, you can reduce the number of hard inquiries on your reports. 

• Avoid making several applications at once: One hard inquiry won’t have much effect on your FICO Score, but several in a short amount of time can have a much larger impact. 

• Ask if you’re unsure: If you know your credit report will be requested soon, you can ask the third party if it will be a soft inquiry or a hard inquiry. 

• Monitor your credit: You should always monitor your credit score and credit report. You can monitor credit using a free tool like Credit Sesame® or Credit Karma™. 

• Check for errors: Finally, monitor your report for any errors or mistakes. Credit reporting errors are common, but fortunately, it’s often easy to fix them so long as you notice them in a timely manner. 

Finally, you should aim to practice responsible credit usage in general. This means avoiding high-interest debt wherever possible, as it can be very costly over time. 

If you have credit card debt, Tally† may be able to help. Tally is a finance app that helps qualifying Americans consolidate credit card balances to save money on interest. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.