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A credit inquiry takes place when a potential lender checks your creditworthiness. This is done by checking your credit history and current credit score. Your credit score is calculated on the basis of some key attributes including payment history, lines of credit, length of credit history, credit utilization ration and the often forgotten credit inquiries.

A credit inquiry on a credit report reflects how many times you have applied for new credit in the recent past. While credit inquiries do not have a major impact on your credit score compared to the other factors, it is imperative to keep a track of the number of inquiries showing up in your report. However, not all credit inquiries are the same and each type can have a different impact on your credit score.

Here is a detailed look at the types of credit inquiries and their influence on your credit score.

What is a Hard Inquiry?

A hard inquiry is executed whenever you apply for a loan. It is a detailed examination of your credit score by the lender to decide whether to approve your loan. Every hard inquiry lowers your credit score by a few points and stays in your credit report. However, the impact of the inquiry on your credit score declines over time.

A hard inquiry will not affect your credit score much if you have an extensive credit history. On the other hand, too many hard inquiries in a short period can affect your credit score and lenders may view it as an early sign of risk, especially if you have a short credit history.

What is a Soft Inquiry?

A soft inquiry is a routine check and is done without your knowledge. It is typically done, when a person, company or lender verifies your credit report as a part of background verification. In fact, a soft inquiry can also be executed to review your own creditworthiness before you apply for a new loan. 

Unlike hard inquiries, soft inquiries do not have a negative impact on the credit score every time your credit history is pulled. Also, soft inquiries are not considered while computing the credit score and hence, do not have any impact on it.

Examples of Hard and Soft Inquiries

The purpose of both inquiries is different and has different users. Hard inquiries are only useful for lenders whereas the users of soft inquiry include business creditors, employers and credit card issuer.

Some of the common examples of hard and soft inquiries are:

Hard Inquiry

  • Home loan application

  • Auto loan application

  • Personal loan application

  • Credit card application

  • Loan against property

  • Education loan application

  • Or, inquiries made as a result of a loan application 

Soft Inquiry

  • Checking your own credit score

  • When an existing lender checks your credit score

  • Pre-qualified credit offer

  • Pre-qualified insurance quotes

  • Background verification 

When does a hard inquiry take place as compared to soft inquiry?

As compared to the soft inquiry, hard inquiries are a result of a loan application you have made. Hard inquiries can take place only after your consent in the form of submission of a loan application.

Whereas, most of the soft inquiries happen without your knowledge, like those pre-approved loan messages you receive in the mail. Or, when a potential employer or business creditors perform a background verification.

What is the impact of a credit inquiry?

Depending on the type of credit inquiry, it may or may not have affect your credit score. While soft inquiries do not influence your credit score at all, hard inquiries can cause a loss of a few points and may temporarily affect your score negatively.

Let us take a look at the break down of how each inquiry can affect your creditworthiness.

Hard inquiry

In general, each hard inquiry results in a fall of 5-10 points in your credit score, but it changes from case to case. While hard inquiries have a weight of 10% on your credit score, its impact is greater under the following circumstances:

  • When you have a short credit history 

  • When there are too many inquiries in a short period of time

As per credit rating agencies, a person with six or more inquiries is eight times more likely to be declared bankrupt, compared to people with no inquiries.

For example, multiple applications for a credit card account within a short period of time results in multiple hard inquiries. This is reflected on your credit report and is often red-flagged by lenders. It may be viewed as a sign of overspending or an inability to pay your bills.

Soft Inquiry

Soft inquiries have no material effect on the credit score, as most of the inquiries are not related to any particular loan application. That is why there is no impact on the credit score, but such inquiries may be included in your credit report for your reference.

How long do inquiries stay on your credit report?

Both the hard and soft inquiries are visible on your credit report to anyone for 24 months. However, a hard inquiry only affects your credit score only for the first 12 months. After that, they do not have any impact on the score.


The basic difference to remember is that a hard inquiry takes place only when you apply for a new line of credit. A soft inquiry, on the other hand, is executed for all other purposes like pre-approved credit cards, background checks and credit reviews. 

Further, soft inquiries enable you to keep a close watch on your credit score. You can use the information from a soft inquiry to improve your score and even prevent a negative slide in your credit score.

Did You Know


The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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