Every time someone checks your credit, a record of that request — called an inquiry — may appear on your credit report. Many people worry that any credit check will hurt their score, but that isn't the case. Understanding the two types of inquiries helps you shop for credit with confidence.
A soft inquiry happens when your credit is checked for reasons that aren't tied to a new credit application. Checking your own credit, receiving a pre-approved offer, or an employer background check (with your permission) are typical examples. Soft inquiries don't affect your credit scores.
When hard inquiries happen
A hard inquiry occurs when a lender reviews your credit because you've applied for new credit, such as a credit card, auto loan, personal loan or mortgage. Hard inquiries can cause a small, temporary dip in your score and stay on your credit report for up to two years, though their impact usually fades well before then.
A single hard inquiry typically has a modest effect. The bigger concern is several applications in a short time, which can signal to lenders that you may be taking on a lot of new debt at once.
That shopping-window rule exists so you can compare rates without being penalized. If you're shopping for a mortgage or car loan, try to do your rate comparisons within a focused period rather than spreading them out over months.
Before you apply, ask whether a lender offers prequalification. Many lenders can estimate your rate using a soft inquiry, letting you compare offers before committing to a full application with a hard inquiry.
Shop smart, apply selectively
Review your credit reports regularly, apply only for credit you genuinely need and use prequalification where possible. If you see a hard inquiry you don't recognize, contact the creditor and the credit bureau, since it may be a sign of fraud.
Planning a major application soon? Talk with a Finance Credit Center specialist about how to prepare and compare offers wisely.