It is important to know the differences between a hard inquiry and a soft inquiry in order to maintain your credit score well. Here are the five main differences:
Effect on Credit Score:
Hard inquiries can reduce your credit score by a couple of points, normally between 5 to 10 points, whereas soft inquiries do not impact your credit score in any way.
Consent Requirement:
A hard inquiry is something you need to approve, typically when you take out a loan or open a credit card. A soft inquiry can be done without your approval, such as checking your own credit or getting pre-approved offers.
Visibility on Credit Report:
Hard inquiries are seen by lenders and stay on your credit report for a maximum of two years. Soft inquiries, on the other hand, are only seen by you and do not show up on reports viewed by lenders.
Purpose of Inquiry:
Hard inquiries are associated with particular credit applications and allow lenders to evaluate your risk as a borrower. Soft inquiries are usually applied for background checks or promotional purposes and do not reflect a request for new credit.
Duration on Credit Report:
Hard and soft inquiries can stay on your credit report for a maximum of two years, but only hard inquiries affect your credit score.
By knowing these differences, you can make educated choices on your credit applications and have a good credit profile.
Source: Bankbazaar