When considering applying for credit, it’s important to consider the difference between a “hard” credit pull and a “soft” credit pull. Prospective lenders will check your credit report prior to making a credit decision. These “hard” inquiries must be managed as they can slightly reduce your credit score for up to 6 months. If you are buying a house or getting a new credit card, a “hard” inquiry is unavoidable. That’s why it’s so important to manage the number of “hard” inquiries. If you are looking for a new credit card for example, do your homework first and apply for the card that best meets your needs. Don’t apply for multiple credit cards and hope you get approved for one. Multiple applications = multiple “hard” pulls = < credit scores.
A “soft” inquiry occurs when a person or company uses your credit report as a background check. Mortgage pre-approvals are an example of a “soft” credit pull as are prequalified credit card offers your receive in the mail. These “soft” inquiries do not impact your credit score in anyway. “Soft” inquiries can occur without your knowledge or consent.
While it’s important to manage the number of “hard” credit inquiries on your personal credit, the more important factors of any credit decision will be your payment history and your credit utilization ratio.