How Hard and Soft Inquiries Affect Your Credit Score

Your credit report contains information that is useful to many people. Credit card companies can use it to see if you would be a good candidate for one of their cards. Mortgage companies can use it to determine if you have been reliable in paying your debts. Employers and landlords can use it to check your background. You can use it to ensure that your credit history is correct. But many people don't realize that some of these inquiries, or requests to see your credit report, can actually damage your credit score.

There are two types of inquiries – hard and soft. Hard inquiries can effect you credit score, whereas soft inquiries cannot.

In general, hard inquiries are done by companies that you authorize to check your credit. This is the case when you apply for credit cards (including in-store credit cards), loans, mortgages, and other entities offering you credit. This type of inquiry stays on record for up to two years and can lower your score, often by as much as 5 points per inquiry.

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When you request a copy of your own credit report, it does not damage your credit score. This is an example of a soft inquiry. Other soft inquiries include employers making an inquiry and credit card companies checking if you qualify for one of their unsolicited offers. Your current creditors also make soft inquiries to check your status. These inquiries are not visible to lenders making a hard inquiry of your credit.

While it is necessary to allow some hard inquiries, there are things that you can do to prevent damaging your credit score. If you plan on applying for a new credit card, compare several cards before you apply for them, then only apply for the card that you really want. If you are looking for a mortgage loan, try to do all your applications within a concentrated two to three week time period. Many credit reporting agencies will consider all the mortgage inquiries within 14 days as one single inquiry.

Remember that only you can authorize hard inquiries, so avoiding careless or unimportant inquiries is one of the easiest ways to protect your credit score.