Hard Credit Inquiry vs. Soft Credit Inquiry: What is the Difference?

Loans help you during financial emergencies. However, your credit score is the main criterion that decides your loan eligibility and terms. Hard and soft inquiries may occur when you or the lender checks your credit score to determine your creditworthiness. But, there are a few fundamental differences between the two types of inquiries. What are they? Read on to find out!

Hard Inquiry and Its Impact

A hard credit inquiry, also called a hard credit check or a hard pull, occurs when a potential lender runs a detailed check on your credit score and credit report. This happens when you actively apply for a new credit facility, including a loan or credit card.

The visibility of these inquiries is not limited to you, implying that anybody who accesses your credit card can see the inquiries. Hard credit inquiry helps lenders to understand your risk profile as a borrower.

A hard inquiry can decrease your credit score by less than 5 or 10 points, and the effect can last up to a year. While a single hard inquiry has a minimal effect on your credit score, several hard inquiries in a short time can raise a red flag to lenders. This is because it showcases a habit of applying for new credit facilities too frequently. 

Soft Inquiry and Its Impact

A soft credit inquiry or a soft pull is generated when a lender wants to assess the risk associated with extending credit to you. It helps them understand your ability to manage finances, enabling them to make informed lending decisions. Moreover, checking your own credit score also generates a soft inquiry. These soft inquiries do not affect your credit score at all.

A soft credit check does not show up on your credit report; however, it is only visible to you. Lenders disregard them when evaluating your creditworthiness. This is because soft inquiries do not indicate that you are actively seeking new credit, which can be a sign of potential financial strain.

Also Read - How to Improve CIBIL Score to Get a Loan at Lower Interest Rates?

What is the Difference Between a Hard and a Soft Inquiry?

Check out the following table to learn about the differences between a hard and soft credit inquiries:

Points of Distinction	Hard Credit Inquiry	Soft Credit Inquiry
Time of occurrence	When you apply for a new credit facility.	When you are eligible for pre-approved credit offers or when you check your credit report.
Impact on credit score	Causes a temporary dip in your credit score, decreasing it by 5 to 10 points.	Zero impact.
Visibility	Visible to any lender or company who accesses your credit report.	Only visible to the borrower.
Purpose	To analyse the risk involved with extending you the credit.	To have an understanding of your financial profile.
Authorisation	You need to authorise a hard inquiry while applying for a credit.	Soft inquiries can occur without your knowledge and do not require consent.

 

Also Read - How CIBIL Score is Calculated | A Step-by-Step Guide

To Conclude

Understanding the differences between hard inquiry and soft inquiry can help you understand which inquiry can hurt your credit score, enabling you to dispute unauthorised hard inquiries on your credit report. However, a soft inquiry has no bearing on your credit score, so you can conduct as many soft inquiries as you want. Nonetheless, understanding the dynamics of both credit inquiries will help you leverage strategies to become a responsible and reliable borrower.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply