Defining Credit Inquiries 101
A credit inquiry is also known as a credit check or credit pull; It’s simply a request to review your credit report. There are two different types of credit inquiries: hard and soft. Hard inquiries are related to the extension of credit and affect your credit score.
An occasional hard inquiry is necessary for most – it's how we achieve money milestones, like purchasing a car or a home. A hard credit inquiry happens when a lender requests your credit report for the extension of credit, like a credit card or loan, and it will usually result in a dip in your score. Because of this, it’s important to apply for credit only when you're confident you'll be approved.
A soft inquiry is when someone checks your credit report, but the inquiry isn't related to the extension of credit; A soft inquiry does not have an impact on your credit score. Checking your own score, screening for promotional offers, and background checks are all common soft credit inquiries.
A dispute can be initiated when you find an invalid inquiry on your credit report. Oftentimes, invalid inquiries have more to do with fraud than with the lender. Here’s what to do: Call the lender or financial institution the inquiry was filed from to let them know you did not apply for the credit the inquiry is for. That way, the lender can stop the application from being opened or the account from spending any money. Then reach out to one of the three credit bureaus to place a fraud alert on your credit report (filing with one credit bureau automatically files you with the other two).
By better understanding hard and soft credit inquiries, you can feel more confident about money moves requiring credit and what to do in the case of an invalid inquiry.
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