Credit Inquiry

At one time or another, most of us have received a pre-approval credit card offer or even an auto loan offer from a bank or a lender.  When a financial institution mails to a prospective client a pre-qualified offer, the bank usually has ran a "Soft Credit Inquiry" to ensure you fit their credit guidelines.  This does not mean that they have your social security number.  They paid one of three credit bureaus for a list of people who fit their credit guidelines.

Due to increases in credit protection or fraud protection programs, you might receive an alert identifying that there was a credit pull in your name.  Please verify with your credit protection company if this was a "Soft" credit or "Hard" credit inquiry.  This does matter. 

Soft inquiry
A soft inquiry, or soft pull, is a term used to refer to an inquiry into your credit history that will not adversely affect the credit score. Often, you are not even aware that there has been a soft inquiry on your credit report. For example, if you receive a solicitation in the mail offering you a credit card, the credit card company has most likely conducted a soft pull to see if you qualify. When mortgage lenders pre-approve you for a loan, they initially use a soft pull. Potential employers use it as a part of background checks, and your current credit card companies use soft inquiries to check up on you. Banks use them to verify that you are who you say you are when opening an account. If you check your own credit report, which you can do for free once a year, this is done with a soft pull. Most of the time, you do not even know when they occur, and they do not affect your credit report.

Hard pull
A hard pull on a credit report is different. It does affect your credit score. Anytime that you are actually applying for a loan or a new credit card, the bank or lender conducts a hard pull on your credit report. This stays on your credit report record. It also can lower your credit score. For this reason, it is important to guard your credit report from too many hard pulls. Some banks even use a hard pull if you are opening a savings account, so be sure to check your bank’s policy. Additionally, the incentives that credit card companies offer for signing up may not be worth the hit to your credit score.

A good rule of thumb for your credit report is to try to avoid any inquiries that are considered hard pulls. By limiting them your credit will be in good shape and you can qualify for the best interest rate available to you when it comes time for you to apply for a loan that you truly need.

If you are enrolled in a credit or fraud alert program, you can always check with them to confirm which type of credit inquiry it is and start from there.  In most cases, it was a Soft Credit Inquiry.