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Credit inquiries can affect your credit score

August 06, 2007

On a credit report, one of the five categories that affect your score is “Inquiries.” These are requests made by third parties to examine your credit history. A variety of parties have the legal ability to make inquiries into your credit report: lenders, potential employers, retailers, landlords, insurance companies. Sometimes this adversely affects your credit score, but sometimes it does not. It depends on whether the inquiry was a soft inquiry or a hard pull.

Soft inquiry
A soft inquiry, or soft pull, is a term used to refer to an inquiry to a credit report that does not adversely affect the credit score. Often, you are not even aware that there has been a soft pull on your credit report. For example, if you receive a credit card solicitation in the mail offering you a credit balance, the credit card company has most likely conducted a soft inquiry on your credit report to see if you qualify. When mortgage lenders pre-approve you for a loan, they use a soft pull initially. Potential employers use soft pulls as a part of background checks. Your current credit card companies run them just to check up on you, and banks use soft pulls to verify that you are who you say you are when opening an account. If you check your own credit report, which you can do for free once a year, this is also done with a soft pull. For most soft inquiries, you do not even know when they occur, and they do not affect your credit report.

Hard pull
A hard pull on your credit report is different. It does affect your credit score. Anytime that you are actually getting a loan, or opening a new line of credit, the lender conducts a hard pull on your credit report. This stays on the record. It also lowers your credit score by about 5 points for 6 months. For this reason, it is important to guard your credit report from too many hard pulls. If you get a store credit card just to save 10 percent on a single purchase, you have hurt your credit score for that 10 percent savings. That is probably not worth it. Some banks even use a hard pull if you are opening a savings account, so be sure to check your potential bank’s policy. And, with credit cards, the incentive that they offer for signing up may not be worth the hit to your credit score.

Try to avoid too many hard pulls into your credit report. This can help you keep your score high so that when you need to apply for a loan, you’ll have a better chance for a great interest rate.


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