Types of Credit Checks and Inquiries and their impact

Hard vs Soft Credit Inquiries

When it comes to managing your finances, one important aspect is understanding credit inquiries and their impact on your credit score. Credit inquiries are essentially credit checks that occur when your credit information is accessed by a legally authorized person or organization, including yourself. Just to clear this out a credit inquiry is a credit check. In this blog post, we’ll dive into the different types of credit inquiries and their impact on your credit score.

Two Types of Inquiries: Hard and Soft

Credit inquiries can be classified into two types: hard and soft inquiries. Hard inquiries are made with your permission for specific transactions, such as when you apply for a credit card, mortgage, or car loan. When a lender or company makes a request to review your credit reports as part of the loan application process, that request is recorded on your credit reports as a hard inquiry, and it usually will impact your credit scores. Hard inquiries include Mortgage, Auto loan, and Personal loan applications

On the other hand, soft inquiries won’t show up on reports requested to evaluate your credit-worthiness. They occur when creditors check your credit to determine any pre-approved offers or when you check your own credit report. Soft inquiries are not associated with greater repayment risk, so they have no effect on your credit scores. Examples of who can make a soft inquiry include utility companies, Auto insurers,  or Credit card issuers with whom you already have accounts.

Credit Inquiries Consent and Impact on Credit Scores

It’s important to note that you will likely know when a hard inquiry happens because you’ll have to give the lender consent. Credit scoring models typically factor in the number of hard inquiries you have when they’re calculating your credit score. Generally, too many inquiries made within a short timeframe is concerning to lenders when it comes to your credit-worthiness. Because hard inquiries can temporarily reduce your credit score, it’s wise to only apply for credit when you really need it.

It’s worth mentioning that some credit scoring models count multiple inquiries for the same purpose made within a short period of time as one. However, several different types of inquiries made within a short period of time can ding your credit score or cause lenders to worry that you are experiencing financial distress.

What to Do if You See a Hard Inquiry You Don’t Recognize

Rest assured that hard inquiries are removed from credit reports 2-3 years after the date they’re made. If you see a hard inquiry you don’t recognize, reach out to the creditor in question, using the contact information included in your credit report. Suspicious inquiries aren’t always connected to illegitimate activity: An unfamiliar creditor may turn out to be the lending partner of a retailer where you applied for a credit card or a dealership where you applied for an auto loan, for instance.

Final Thoughts

In conclusion, understanding credit inquiries and their impact on your credit score is important for managing your finances. While hard inquiries can temporarily reduce your credit score, it’s important to only apply for credit when you really need it. And if you see a hard inquiry you don’t recognize, don’t panic – it may just be a legitimate request from a lending partner. By staying informed about credit inquiries, you can make more informed decisions about your finances and ensure that you maintain a healthy credit score.

If you found this helpful you can read below more about what a credit report is and why it is important:

If you need to improve your understanding of credit scores you can read this previous article below:


Meet The Editor JJ, an experienced financial professional committed to empowering individuals with expert guidance. With an MBA and CPA qualifications, The Editor JJ brings over 15 years of diverse financial management experience. Having personally assisted over 600 individuals in debt reduction and wealth accumulation, The Editor JJ's dedication to financial freedom is evident. Utilizing personal and professional insights, The Editor JJ addresses complex financial challenges. Through JJs FinClub, he simplifies concepts and offers actionable advice for readers to seize control of their financial futures.

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