In simple terms, a hard pull impacts your credit score, whereas a soft pull doesn’t affect your credit. So, make sure that you understand the differences between both.
You can think of your credit score as a pizza divided into slices of different sizes. There are three large slices representing – your credit utilisation rate, credit history, and on-time payment records. Besides these three large slices, there are other smaller slices as well.
One such slice represents hard inquiries, also known as hard pulls. Every time you apply for new credit – a loan or a credit card – you take a small bite out of this slice. Which, in turn, impacts your credit score, making it drop down by a few points.
But, the question here – how much of an effect do hard inquiries have on your credit? Is there any way to reduce the impact of hard inquiries? For that, we need to start from the basics, understanding the differences between hard and soft pulls.
What is a hard inquiry?
A hard pull (also known as hard inquiry or hard credit check) is when a lender or credit card company makes an inquiry into your credit score.
All lenders use your credit score to determine if you’re creditworthy. Whenever you apply for credit, the lender/credit card company requests your credit score and report from a credit bureau like Equifax, Experian, TransUnion CIBIL, or HighMark. The lender then uses your credit score to decide whether to grant you the loan or not.
If the hard inquiry reveals that your credit scores are low, then the lender may not sanction the loan. Even if approved, the lender may charge you steep interest rates. On the other hand, if the hard pull reveals that you have excellent credit, you may receive lower interest rates.
Generally speaking, a hard inquiry can drop your credit score by a few points. However, note that not all hard inquiries pull down your credit score.
What is a soft inquiry?
A soft pull (also known as soft inquiry or soft credit check) is when an individual reviews his/her credit score. Soft pulls do not impact your credit score.
Not just lenders, you can also check for your credit score. When you check your credit score, it leads to a soft pull. Soft pulls do NOT affect your credit score.
Not just individuals, other third-parties like employers, insurance companies, and lenders can also do a soft pull on your credit report. For example, insurance companies rely on soft pulls to provide prospective customers with an accurate quote. Similarly, credit card companies and banks use soft pulls to issue pre-approved offers. Employers can also use soft pulls to determine a prospective employee’s credit ratings before hiring him/her.
Soft pulls are not directly related to lending decisions. It is like looking at your own credit report – they are not an in-depth check. Hence, they do not impact your credit scores.
Differences between Hard Pulls and Soft Pulls
|Features||Hard Inquiry||Soft Inquiry|
|Impact on Credit Score||May or may not affect your credit score||Doesn’t impact your credit score|
|Who does it?||LendersCredit card issuers||SelfEmployersInsurance companies (for providing quotes)Credit card issuers (for pre-approved cards)Lenders (for pre-approved offers)|
|Why is it done?||To determine your creditworthiness||To check current credit ratings to determine the type of offers available or by self to keep track of recent credit scores|
How long do hard inquiries impact my credit score?
Generally speaking, hard pulls stay on your credit report for one or two years. Whenever a hard inquiry is made on your credit report, your credit score may drop down by a few precious points. However, the good news here is that – the impact of a hard inquiry drops over time. And, your credit score bounces back to normal after a few months.
Can I remove a hard inquiry from my credit report?
It’s not possible to remove a proper hard inquiry from your report. However, suppose the inquiry was made without your knowledge (when you have not applied for new credit). In that case, you can approach the credit bureau to remove the associated hard inquiry from your credit report.
If you notice any unusual hard pull on your credit report, then you can dispute it. To file a dispute, follow the steps listed below:
- Contact the credit bureau and inform them that the inquiry is made without your permission.
- Contact the lender who has made the hard pull and let them know that you’ve raised a dispute.
- Once you have notified both the credit bureau and the lender, it takes around 30 – 45 days to investigate and resolve the issue.
How to reduce the impact of hard pulls on your credit?
Check your credit score frequently
Checking your own credit score will never impact your credit. It helps you stay on top of your credit scores and notice any errors. If you see any unrecognised hard pulls, make sure to raise a dispute with the credit bureau. Checking your credit score is hassle-free with CreditMantri. All you have to do is provide a few personal details, and your latest score is sent directly to your inbox.
Do not apply for multiple loans within a short time
If you want to reduce the impact of hard pulls, try to avoid making multiple loan/credit card inquiries quickly. The easiest way to prevent numerous hard inquiries is to use a loan/credit card aggregator.
CreditMantri is an excellent example of a credit card/loan aggregator. You are presented with a list of the top loans/credit cards matched to your credit profile. This way, you don’t have to submit separate applications with each lender, thereby reducing the number of hard inquiries made on your credit report.
Similarly, if you’re shopping around for the best interest rates, make sure you submit all the applications within a short timeframe. This way, credit bureaus track this as a single credit inquiry, which reduces the damage to your credit score.
Finally, don’t worry too much about Hard Inquiries
Though hard pulls can make your credit score drop down by a few points, they do not have a massive impact on your overall credit score. Other factors like credit utilisation ratio, length of your credit history, credit card balances, and on-time payments play a more significant role in impacting your credit score.
Hard and soft pulls are a regular part of your financial life. Though hard inquiries can pull down your credit score, the impact is minimal and drops off your credit report after two years. Soft pulls, on the other hand, have no effect on your credit score. You can check your credit report any number of times without worrying.
When you practice other good credit habits like paying your bills on time, maintaining low credit utilisation rates, the occasional hard pull made by a lender will only have minimal impact on your credit scores.