Every time someone checks your credit report, the inquiry is logged.
That’s important because too many inquiries over an extended period of time can spell trouble for your credit score.
There are different ways and different reasons your credit report might be checked. Some, like hard credit checks—also known as hard inquiries or hard pulls—might have an adverse impact on your credit score. Others, so-called soft checks, are harmless. Too many hard credit checks in a short period of time could knock a few points or more off your credit score. But no matter how many soft credit checks are run against your credit history, they will have no effect.
Here’s how to tell the difference between hard and soft credit checks.
How hard and soft credit checks differ
Your borrowing and repayment activity is tracked by the three major credit bureaus: Equifax, Experian and TransUnion. They each maintain a report on your credit-worthiness, assigning you a three-digit score based on an array of factors such as the length of your borrowing history, the amount and type of outstanding debt you have and your proven ability to make payments. The higher your credit score, the easier it is to borrow and secure the best interest rates.
Whenever you apply for credit, whether it’s for a new mortgage or a new credit card, the lender looks into your credit history to learn more about whether you’re a good borrower and make payments on time.
Each inquiry shows up on your credit report and contains information about the lender doing the inquiring and what type of inquiry they made. When an inquiry is directly related to borrowing money it is a hard credit check.
But not all credit checks are done by banks seeking information about the trustworthiness of a borrower. There are any number innocuous reasons your borrowing history might be examined: You may be checking in on your own credit report, a credit card company may look into your borrowing history to offer you a pre-qualified promotion, or a potential employer may pull an applicant’s report as part of the screening process. Instances like these constitute soft credit checks.
The effect of credit checks on your score
The credit bureaus track every credit pull (both hard and soft) and log them for two years. Soft credit checks have no effect on your credit score. You’re free to check in on your own credit report as often as you want. In fact, you should consider checking your credit report regularly to make sure it is correct, which you can do free each year at any of the credit bureaus.
Hard checks are another story. Hard checks impact scores for one year, with those logged in past six months counting the most toward your total. Banks want to know how often a person has applied for credit: Too many tries in a short period might indicate a risky borrower.
If you have a well-established financial track record, hard credit checks won’t affect your credit score much, if at all. But if you have a limited borrowing history, you could find that too many hard inquiries within 30 days could impact your ratings score by as many as five points per check.