March 16, 2022
March is Credit Education Month and we understand that credit can be an overwhelming (and touchy) subject. However, your credit affects lots of different aspects of your life like buying a home, buying a car and even renting an apartment! Each of those situations require a credit inquiry. A credit inquiry is a request by an institution to look at your credit report information from a credit reporting agency. These inquiries fall into two different types: Hard or soft.
A hard credit inquiry refers to a situation where a lender checks your credit before approving you for a loan, like a mortgage, car loan or a credit card you’ve applied for. These inquiries cannot be done without your consent and do affect your credit score. However, they only lower your credit score by a few points, and when done sparingly, isn’t a huge deal. But note, that some lenders do see too many hard inquiries in a short amount of time as an indication of a high-risk customer. Typically, a hard inquiry will show on your credit report for up to two years but will only affect your score for one year.
A soft credit inquiry is a review of your credit file, including reviews of existing accounts by lenders, prescreening inquiries by prospective lenders, and requests for your annual credit report. These inquiries can be done without your consent and do not affect your credit score. Soft inquiries will appear on your credit report, but only you will be able to see them. Soft inquiries happen all the time. All those credit card offers you receive in the mail, background checks from an employer and checking your own credit—all soft inquiries.
A quick way to tell whether a hard or soft inquiry will be done is to keep your consent in mind. To do a hard inquiry, a lender is required to get written consent. You’ll be asked to sign a credit report authorization form and by signing this document you’re giving the institution permission to pull a hard inquiry on your credit.
These days it’s almost impossible to avoid either hard or soft inquiries to your credit and you don’t need to! The most important factor is to understand the differences and how each of them can affect your credit score. If you’re interested in checking your credit, use SavvyMoney to view your credit score and full report quickly and easily from your DIGITAL BANKING+ dashboard! (Don’t worry—that’s a soft inquiry.) If you have questions about your credit score, credit report or building your credit feel free to stop into a First United Banking Center to visit with a loan officer or call us at (855) FUB-STAR (382-7827.) Happy Credit Education Month!