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Credit Inquiry

Reviewed by Vishnu | Updated on Jan 05, 2021


What is a Credit Inquiry?

A credit inquiry can be referred to as a request put up by a financial institution or firm for the credit report information of an individual or entity from a credit reporting bureau or agency. Credit enquiries can be of two types - soft inquiries and hard inquiries.

Hard Inquiry

A hard inquiry is requested by a creditor when a borrower applies for a new line of credit. Hard inquiries are issued by the credit bureaus in the form of credit reports which include the prospective credit borrowers’ credit score as well as their credit history.

Hard inquiries are generally not advised as the borrower’s credit score can be impacted. Also, the hard inquiries remain in the borrower’s credit report for almost two years.

A credit report possessing several hard inquiries within a short span of time can result in a decreased credit score for the borrower. On the same lines, the unusual number of hard inquiries can also be considered as the borrowers attempt to increase the existing credit. This can leave a negative impact resulting in credit lenders consider offering a higher credit limit to be a risky affair.

Soft Inquiry

Soft inquiries can be requested for various requirements. Also, they are not recorded in the credit reports, unlike the hard inquiries. Many credit companies come to an agreement with credit bureaus for soft inquiries to recognise prospective consumers.

These enquiries can also be customised depending on their underwriting requirements that adhere to specific characteristics of a loan.

Similarly, credit borrowers can obtain personal credit reports with the help of soft inquiries. Individual consumers can also request for free annual credit reports from credit bureaus.

As a move to attract more customers, most credit card companies allow individuals to sign up for free credit scores online.

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