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When applying for credit, such as a loan or credit card, your credit report is checked to assess your financial history. These checks are called credit inquiries, and they can be classified into two types: hard and soft inquiries. Understanding the difference between them is crucial for maintaining a healthy credit score and protecting yourself from unauthorized credit pulls.
What Are Hard and Soft Inquiries?
Hard and soft inquiries differ mainly in their purpose and impact on your credit report.
Hard Inquiries
A hard inquiry occurs when a lender or creditor checks your credit report as part of a lending decision. This typically happens when you apply for a new credit card, loan, or mortgage. Hard inquiries can slightly lower your credit score temporarily and are visible to other lenders.
Soft Inquiries
Soft inquiries happen when your credit report is checked for non-lending reasons, such as pre-approved offers, background checks, or when you check your own credit score. These inquiries do not affect your credit score and are not visible to lenders evaluating your creditworthiness.
Why Are Hard Inquiries Important?
Since hard inquiries can impact your credit score, it’s important to monitor them. Multiple hard pulls in a short period can indicate financial distress or lead to a lower credit score, affecting your ability to get favorable loan terms.
How to Correct Unauthorized Hard Pulls
Sometimes, you may find a hard inquiry on your credit report that you did not authorize. This could be a sign of identity theft or error. Here’s what you should do:
- Review your credit report thoroughly to identify unauthorized inquiries.
- Contact the credit bureau that reported the inquiry and file a dispute.
- Notify the creditor or lender responsible for the inquiry and request an explanation.
- Place a fraud alert or credit freeze if you suspect identity theft.
- Monitor your credit reports regularly to detect any suspicious activity.
Taking these steps can help you correct errors and protect your credit profile from unauthorized access.
Conclusion
Understanding the difference between hard and soft inquiries helps you manage your credit health effectively. Always review your credit reports carefully and act promptly to correct any unauthorized hard pulls to maintain a strong credit profile.