Hard vs. soft inquiries

Soft inquiries happen when you check your own credit, when a company pre-screens you for offers, or when an existing lender reviews your account. They don't affect your scores, and only you can see them.

Not just anyone can pull your credit report. The FCRA lists the permissible purposes for getting a consumer report (15 U.S.C. § 1681b). The common ones are:

• A credit transaction you start, like applying for a card, loan, or mortgage.
• Reviewing or collecting an account you already have.
• Employment purposes, but only with your written permission, given on a stand-alone disclosure.
• Underwriting insurance you apply for.
• A legitimate business need in connection with a transaction you start, such as some rental or utility applications.
• A court order or subpoena, and certain government agencies such as child support agencies.
• Prescreened offers of credit or insurance, which use limited information and don't count against your score.

Whether a check counts as "hard" or "soft" depends on its purpose. Applications for new credit are hard; most of the rest are soft.

Many shopping tools start soft and become hard at the moment you formally apply. A card issuer's prequalification check is usually soft; submitting the full application usually isn't. A lender's rate quote may be soft, while mortgage preapproval generally involves a hard pull because the lender is underwriting a real loan. At a car dealership, filling out a credit application usually authorizes hard pulls by the lenders it's sent to. When in doubt, ask before you click submit or sign.

An employer can get your consumer report only with your written permission, given on a stand-alone disclosure document rather than buried in an application. If the employer plans to take adverse action based on the report, such as not hiring you, it must first give you a copy of the report and a summary of your FCRA rights so you have a chance to respond (15 U.S.C. § 1681b(b)).

Employment checks don't hurt your credit scores: FICO says inquiries marked as coming from employers aren't counted (FICO). If an employment report contains an error, you can dispute it with the company that prepared it, just like a credit report.

Hard inquiries happen when you apply for new credit and the lender pulls your report. They can lower scores slightly and the effect fades over time. Hard inquiries can stay on your report for up to two years, though FICO scores generally consider only the last 12 months (FICO).

Your credit report lists inquiries. When you request your file, the bureau must identify everyone who got your report in the past year, or in the past two years for employment purposes (15 U.S.C. § 1681g). Hard inquiries are visible to lenders who review your report later; soft inquiries appear only on the copy you see.

Check the names and dates against your own records. Inquiries sometimes appear under a bank's or financing company's name rather than the store or dealer you dealt with. If you can't match one, see disputing an unauthorized inquiry.

Scoring models generally treat several mortgage, auto, or student-loan inquiries within a short window as a single inquiry, so you can compare rates. The window varies by model, commonly 14 to 45 days. This doesn't apply to credit card applications.

1. 1Ask first: "Is this a soft or hard pull?" Many card issuers and lenders offer prequalification or preapproval checks that use a soft inquiry.
2. 2Compress your loan shopping. For a mortgage, auto, or student loan, do your rate comparisons within a few weeks so scoring models can treat them as one search.
3. 3Be specific at the dealership. Ask how many lenders your application will be sent to, and say so if you'd rather limit it.
4. 4Space out card applications. Rate-shopping protection doesn't apply to credit cards, so each card application can count.
5. 5Apply when you're ready to accept. A hard inquiry for an offer you'll never use costs you a little for nothing.

Those "you're preapproved" letters come from prescreening: a lender asks a bureau for a list of consumers who meet its criteria. It's a soft inquiry and doesn't affect your score. Being prescreened isn't the same as being approved; if you respond, the lender will usually check your credit again.

You can opt out of prescreened offers from the nationwide bureaus. Under the FCRA, an opt-out made by phone or online lasts five years, and an opt-out made with a signed notice-of-election form is permanent until you reverse it (15 U.S.C. § 1681b(e)). The official joint opt-out site for the bureaus is OptOutPrescreen.com. Opting out reduces mailed offers, which some people prefer for privacy or to cut down on mail that could be stolen.

A hard inquiry you didn't authorize can be a sign of identity theft. Contact the lender listed, and consider disputing it and freezing your credit. Full steps: how to dispute an unauthorized hard inquiry.