What Is a Credit Inquiry?
Credit inquiries play a crucial role in the personal finance world. They influence a consumer’s credit score and ability to obtain loans or lines of credit. For how important it is, many people find credit inquiries to be a somewhat confusing aspect of their finances. Simply put, a credit inquiry (also known as a credit check or pulling your credit) occurs when someone accesses your credit report. Credit reports are pulled for a few different reasons, such as when you apply for a credit card, loan, or mortgage. There are two types of credit inquiries – soft and hard. This blog aims to explain the difference between soft and hard credit inquiries, deduping, and what it all means for a consumer’s finances.
Soft Inquiries
A soft credit inquiry (also known as a soft pull) doesn’t involve a credit decision and doesn’t impact your credit score. They are typically initiated for informational or pre-approval purposes and are a normal part of various financial processes. Common instances of soft credit inquiries include –
- Pre-Approved Credit Offers
- Personal Credit Checks through a Monitoring Service
- Employment Background Checks
- Insurance Quotes
- Account Reviews by Existing Creditors
Hard Inquiries
A hard credit inquiry (also known as a hard pull) occurs when a potential lender pulls your credit during the decision-making process for a credit application. Contrary to soft inquiries, hard inquiries do have a temporary impact on your credit score. Therefore, it’s important to be mindful of the frequency of hard inquiries. While hard pulls are a natural part of the credit application process, it’s important to manage them responsibly. If you’re able, space out credit applications and be selective about new credit to help minimize the impact on your credit score. Common instances of hard credit inquiries include –
- Credit Card Applications
- Mortgage Applications
- Auto Loan Applications
- Personal Loan Applications
- Student Loan Applications
- Apartment Rental Applications
- Retail Financing
- Cell Phone Contracts
What Is Deduping?
Deduping (also known as deduplication) is a process that ensures fair, accurate credit reports by consolidating duplicate hard and soft inquiries. Consolidating entries prevents negative impacts on credit scores, particularly with hard inquiries from multiple credit applications. Deduplication also allows rate “shopping” to be seen as a single event, more accurately reflecting a consumer’s financial behavior. Ultimately, deduping allows consumers and lenders to make well-informed decisions.
What Do Inquires and Duduping Mean for Consumers?
Hard and soft credit inquiries, along with deduping, are fundamental components to a consumer’s credit score (the ability to secure loans, obtain favorable interest rates, gain access to a credit card, etc). Comprehending credit inquiries and how they differ allows individuals to make informed decisions, while the deduping process ensures the accuracy and fairness of credit reporting. It’s important to understand both, as they contribute to better financial transparency for consumers.
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