You check your credit report and find several inquiries. One came from a loan application you remember. Another came from a company you have never contacted. Do they mean the same thing for your credit score? No. An inquiry records a request to review your credit information, but its purpose determines whether it is classified as hard or soft.
What makes an inquiry hard?
A hard inquiry generally happens when a lender reviews your report to decide on an application for credit. It appears on your report, can be seen by others who obtain that report, and may affect your score. The Consumer Financial Protection Bureau (CFPB) explains that scoring models consider how recently and how often you have applied for credit. Several applications close together can therefore matter more than an isolated application.
How much does one inquiry change a score? There is no number that applies to everyone. myFICO says one additional inquiry costs most people fewer than five points on a FICO Score, but the effect depends on the rest of the credit file and the scoring model used. An inquiry appearing on a report also does not mean every future lender will weigh it the same way.
Which checks are soft?
Soft inquiries cover checks that are not treated as new-credit applications for scoring purposes. Examples include reviewing your own report, a current creditor checking an existing account, certain employment screenings, and checks used for prescreened credit offers. The CFPB says soft inquiries do not affect your credit score. You may see them when you read your own report, but other parties obtaining your report do not see those soft inquiries.
That difference can make a long inquiry list less alarming than it first looks. A routine review by a company that already holds your account is different from an application for a new account. A prescreened offer can also involve a soft check even though you did not request the offer; the Federal Trade Commission (FTC) explains prescreened offers in its consumer guidance. The word “prescreened,” however, does not tell you what kind of check would follow if you later applied.
Who is allowed to access a report?
The Fair Credit Reporting Act sets rules for access to credit reports. A company needs a legally permitted reason to obtain one. The CFPB describes an application and an existing customer relationship as reasons a card company may check a report. Permission is commonly given as part of an application. Other permitted purposes, including certain prescreening activities, have their own rules.
That is why an unfamiliar entry deserves a closer look, but not an immediate conclusion that someone broke the law. First ask what kind of inquiry it is and whether you recognize the company or an account connected to it. If the entry is a hard inquiry and you did not apply for credit, it may signal an error or an attempted application in your name. For the legal requirements themselves, consult the FTC’s Fair Credit Reporting Act text or a qualified professional rather than relying on a brief summary.
What happens when you compare loan rates?
Comparing loan offers can mean letting several lenders check your credit. Scoring models generally make an allowance for this kind of rate shopping when the inquiries concern the same type of loan and occur within a short period. The CFPB says inquiries within a window of about 14 to 45 days are generally treated as no more than one inquiry for scoring. The applicable window depends on the model, so there is no single deadline that fits every score.
The category matters as much as the timing. Mortgage inquiries and auto-loan inquiries are generally not combined into one rate-shopping group merely because they happened in the same month. Shopping that runs beyond 45 days can also result in multiple inquiries being counted. The CFPB notes another timing rule for certain common models: qualifying mortgage, auto, and student-loan inquiries made in the 30 days before a score is calculated have no effect on that score. These are scoring rules, not a guarantee about the score a particular lender will use.
What should you look for on your own report?
Checking your own credit report is a soft inquiry, so the act of reviewing it does not lower your score. Federal law provides a free annual report from each nationwide credit reporting company, and the companies have continued to offer free weekly reports on request. Reading a report gives you a chance to separate application checks you recognize from account reviews and entries you cannot place.
If an inquiry looks unfamiliar, note the company name, date, and whether the report labels it hard or soft. Then check the credit reporting company’s consumer instructions and the FTC’s identity theft resources for current steps if you suspect an unauthorized application. Before submitting a future credit application, you can ask how the company expects to check your report and whether the check is for an approval decision. Those questions help clarify what you are agreeing to, even though the final inquiry classification depends on the purpose of the review.
Please seek a professional. This article is general information, not financial, tax or insurance advice. Please seek a licensed financial, tax or insurance professional about your own situation.
