Ask FICO: Hard and Soft credit inquiries

Ask FICO is a Q & A column where our credit scoring expert, Tom Quinn, answers common credit score and credit-related questions that you have. Post your questions on our Understanding FICO Scoring and General Credit Topics threads on the myFICO Forums.

This month’s question: “Hard pulls vs. Soft pulls: Why are they different?

One of the more common questions we get about FICO® Scores relates to how credit inquiries impact credit scores. This is a bit ironic because credit inquiries are a small percentage of a FICO Score. Other factors such as payment history and the amount of debt owed have a larger percentage.

What is a credit inquiry?

Any time an entity accesses a consumer’s credit report, the credit reporting agency captures information about that request and a summary is posted on the credit report – this is an inquiry. Typically, the information captured includes the name of the lender or entity making the inquiry, the date of the inquiry and a code that includes information regarding the type of inquiry (is it for a mortgage application, an employment screening, a card issuer’s account review, etc.).

What’s the difference between “soft and hard” credit inquiries?

You may often see credit inquiries referenced as hard or soft inquiries and wonder what that means.

Whenever you apply for credit, the lender will pull your credit report(s) and credit score. Lenders use this information to help them decide. These are “hard inquiries” because you are seeking credit.

Examples of “hard credit inquiries”:

  • You go car shopping and apply for financing at the car dealership and they pull a credit report on you.
  • You get a preapproved credit card offer in the mail and respond to the offer.
  • You contact your credit card company and request a credit line increase. The company pulls a fresh credit report on you to help determine if they will grant the line increase.

A “soft inquiry” is when your credit report is viewed, but not because you are requesting access to credit.

Examples of “soft credit inquiries”:

  • You pull a copy of your own credit report.
  • Your bank gets an updated FICO® Score on all its customers to check the credit quality of its customer base.
  • You got a new job and your employer pulled your credit report as part of its new employee screening process.

Inquiries stay on the credit report for 2 years. FICO® Scores only consider hard inquiries posted in the last year.

Hard inquiries factor into FICO® Scores because they show that you are looking for new credit. Data shows that credit seeking consumers are riskier compared to consumers who are not seeking new credit. Research on a random nationally representative sample of credit bureau data shows people with five or more inquiries in the past year were six times more likely to become 90 days past due or greater on a credit obligation compared to people who had no credit inquiries.

While hard inquiries are a factor in your FICO Scores, their impact on a credit score is minor. FICO has created a special inquiry logic to account for lending scenarios where many lenders are accessing your credit report even though you are only looking for one loan.

As a general rule, it’s ok to apply for credit when needed. Be mindful of this information so you can start the credit-seeking process with more confidence. Talk to your peers about FICO Scores and credit issues on our FICO Forums.

The following two tabs change content below.

Tom Quinn

Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.