What is a soft credit inquiry?
A soft inquiry is an inquiry into your credit report that happens after someone requests it, even if you didn't apply for credit. It might be you who requests it, or a company considering doing business with you.
Soft inquiries are often used to screen for preapproval financing offers, insurance rates, or an employment background check. This does not affect your credit score and can even help you understand the effect of your financial decisions better. Read to see how a soft inquiry works.
The primary purpose of soft credit inquiries
Before extending you any type of credit, insurance companies, financial institutions, and creditors may want to know how you are handling your debt and paying your bills. We all have some form of debt, and creditors may want to know your credit usage, such as how much you have borrowed on each loan or credit card (known as your utilization rate). A current creditor may look at your credit when considering your account for a credit line increase.
A soft inquiry allows a creditor to review your credit report and credit score to get a sense of how well you are managing your credit and paying your bills. It can provide them with an indication of your financial stability and how risky of a borrower you might be.
Who can initiate a soft credit inquiry?
Here are a few examples of common soft credit inquiries:
- A potential employer checks your credit for a background check.
- A credit company or insurance company you do business with checks your credit.
- Credit card companies that want to send you preapproval offers check your credit.
You can make a soft inquiry on your own credit
A soft credit inquiry will also occur when you check your own credit report. In fact, making a soft inquiry — also known as checking your credit — can be used to understand how your financial decisions are affecting your credit score. If your credit score drops, for instance, you can get a copy of your credit report and see why. You can see in black and white that your credit utilization increased that month, which may be why your score dropped.
You can also see all the parts of your credit score (payment history, credit utilization, length of history, new credit, and credit mix) all in one in place.
Reviewing the soft inquiries listed on your credit report can provide useful information on what companies are considering offering you credit. The list will typically be found under "soft inquiries" or "inquiries that do not affect your credit rating." It will show the details of all soft inquiries, including the requester's name and address and the date of the inquiry.
The Fair Credit Reporting Act (FCRA) governs how credit bureaus, financial institutions, or other agencies obtain, share, and use your financial information. You have the right to get a free copy of your credit report every 12 months from each of the three credit bureaus, although, since 2020, you can get free weekly access through AnnualCreditReport.com.
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Soft credit inquiry vs. hard credit inquiry
There are two types of inquiries someone can make into your credit: soft inquiries and hard inquiries. They are similar, but not the same.
Impact on credit score
A soft inquiry does not impact your score. In fact, creditors cannot even see your soft inquiries — they are only listed on the credit reports you request.
However, a hard inquiry does impact your score, because it happens when you apply for credit, such as filling out an auto loan, credit card, or personal loan application. Hard inquiries are unavoidable but can affect your credit score by dropping it for a few months. A hard inquiry may stay on your credit report for up to two years.
Credit bureaus calculate hard inquiries into your credit score because if you are applying for additional credit, it can be a signal to lenders that you might be at greater risk of not paying back your bills down the road. However, soft inquiries don't impact your credit score because they don't indicate a formal credit application.
Frequently asked questions about soft inquiries
How many soft inquiries are too many?
There's no set number for how many soft inquiries are too many since they do not impact your credit score and lenders cannot see them.
Do soft inquiries appear on all three credit reports?
Soft inquiries don't always appear on all three credit reports. Not every credit bureau includes soft inquiries on their reports.
Can I remove a soft inquiry from my credit report?
Usually, you can't remove a legitimate soft inquiry from your credit report. However, don't worry: It won't negatively impact your credit.
