Quick overview

When you or a creditor checks your credit report, the inquiry is recorded as either a soft inquiry or a hard inquiry. Soft inquiries don’t hurt your credit score and are often used for background checks, prequalification offers, or when you check your own credit. Hard inquiries happen when you apply for new credit (credit cards, mortgages, auto loans) and can lower your score by a few points for a short time. (Sources: CFPB, FICO).

How each inquiry works

  • Soft inquiry: Triggered by things like checking your own score, a potential employer’s background check, a prequalified credit-card offer, or a lender doing a preliminary check. Soft pulls do not affect your credit score and are typically visible only to you on the report. (Consumer Financial Protection Bureau)

  • Hard inquiry: Triggered when a lender pulls your credit to make a lending decision after you apply for credit. Hard inquiries can reduce your FICO score by a few points; the visible record remains on your credit report for two years, though the score impact generally fades within about 12 months. (FICO; CFPB)

Rate shopping and the “single inquiry” effect

Credit scoring models account for rate shopping. If you shop for the same type of loan (auto, mortgage, or student loan) and multiple lenders pull your credit within a short window, those multiple hard inquiries are usually treated as a single inquiry for scoring purposes. The exact window varies by scoring model (commonly between about 14 and 45 days), so group rate-shopping into a short span to minimize score impact. (myFICO; CFPB)

Real examples you can relate to

  • Applying for a credit card: If you click “prequalify” most issuers use a soft inquiry. Only submit the full application when ready — that triggers a hard inquiry.

  • Shopping for a mortgage or auto loan: It’s appropriate to get multiple rate quotes. Keep those applications within the same short window so scoring models don’t count each hard pull separately.

  • Checking your credit: Use services or AnnualCreditReport.gov to view your reports without harming your score (soft pull).

Practical tips to protect your score

  1. Ask before you apply: Ask lenders whether they use a soft or hard pull for prequalification.
  2. Bundle shopping: Do rate shopping for mortgages, auto loans, or student loans within a narrow window (shop within days to a few weeks, depending on the creditor) to reduce impact. (myFICO)
  3. Limit new accounts: Only apply when you need credit or when the benefit (better rate or terms) outweighs the temporary dip.
  4. Monitor your credit: Check your credit reports at least annually at AnnualCreditReport.gov and consider free tools that use soft pulls. (FTC)

Common misconceptions

  • Myth: “All inquiries poison my score.” Truth: Only hard inquiries can affect your score; soft inquiries do not. (CFPB)
  • Myth: “A single hard inquiry ruins my chance for good rates.” Truth: A single hard pull usually costs only a few points and fades within a year; the right loan terms often outweigh the temporary impact.

How this matters for individuals and small businesses

Individuals applying for mortgages, auto loans, credit cards, or student loans should plan applications and use prequalification where available. Small-business owners applying for business credit will face similar mechanics; business credit checks can involve both personal and business credit depending on the product.

Related FinHelp guides

Sources and further reading

Disclaimer: This page is educational and not personalized financial advice. For decisions that affect your credit or financing terms, consult a certified financial planner or credit counselor who can review your full situation.