Hard & Soft Credit Inquiries: What They Are And Why They Matter

A hard inquiry may impact your credit scores and stay on your credit reports for about two years. By contrast, soft credit inquiries won’t affect your scores.

Your pie is divided into slices, each of which represents a different factor that goes into your credit scores. One large slice is your open credit card utilization rate, another is your percentage of on-time payments, another is the length of your credit history and yet another is the number of derogatory marks on your credit reports.

And then there’s a tiny slice that represents your hard credit inquiries. Every time you apply for more credit, you take a small bite out of this slice. But what exactly is a hard inquiry, and how much of an effect does it really have on your credit?

Let’s start with the basics.

What is a hard inquiry?

Hard inquiries (also known as “hard pulls”) generally occur when a financial institution, such as a lender or credit card issuer, checks your credit when making a lending decision. They commonly take place when you apply for a mortgage, loan or credit card, and you typically have to authorize them.

A hard inquiry could lower your scores by a few points, or it may have a negligible effect on your scores. In most cases, a single hard inquiry is unlikely to play a huge role in whether you’re approved for a new card or loan. And the damage to your credit scores usually decreases or disappears even before the inquiry drops off your credit reports for good.

Common Question

How long will a hard inquiry stay on my credit reports?

Generally speaking, hard inquires stay on your credit reports for about two years.

That doesn’t sound so bad, but you may want to think twice before applying for a handful of credit cards at the same time — or even within the span of a few months. Multiple hard inquiries in a short period could lead lenders and credit card issuers to consider you a higher-risk customer, as it suggests you may be short on cash or getting ready to rack up a lot of debt. So consider spreading out your credit card applications.

What is a soft inquiry?

Soft inquiries (also known as “soft pulls”) typically occur when a person or company checks your credit as part of a background check. This may occur, for example, when a credit card issuer checks your credit without your permission to see if you qualify for certain credit card offers. Your employer might also run a soft inquiry before hiring you.

Unlike hard inquiries, soft inquiries won’t affect your credit scores. (They may or may not be recorded in your credit reports, depending on the credit bureau.) Since soft inquiries aren’t connected to a specific application for new credit, they’re only visible to you when you view your credit reports.

Common Question

Will checking my own credit scores result in a hard inquiry?

No. This is reported as a soft inquiry, so it won’t lower your scores. You can check your VantageScore 3.0 credit scores from two major credit bureaus, TransUnion and Equifax, for free at Credit Karma as often as you like without affecting your credit scores.

Examples of hard and soft credit inquiries

The difference between a hard and soft inquiry generally boils down to whether you gave the lender permission to check your credit. If you did, it may be reported as a hard inquiry. If you didn’t, it should be reported as a soft inquiry.

Let’s look at some examples of when a hard inquiry or a soft inquiry might be placed on your credit reports. Note: The following lists are not exhaustive and should be treated as a general guide.

Common hard inquiries

• Mortgage applications

• Auto loan applications

• Credit card applications

• Student loan applications

• Personal loan applications

• Apartment rental applications

Common soft inquiries

• Checking your credit score on Credit Karma

• “Pre-qualified” credit card offers

• “Pre-qualified” insurance quotes

• Employment verification (i.e. background check)

Keep in mind, there are other types of credit checks that could show up as either a hard or soft inquiry. For example, utility, cable, internet and cellphone providers will often check your credit.

If you’re unsure how a particular inquiry will be classified, ask the company, credit card issuer or financial institution involved to distinguish whether it’s a hard or soft credit inquiry.

How to dispute hard credit inquiries

We recommend checking your credit reports often. If you spot any errors, such as a hard inquiry that occurred without your permission, consider disputing it with the credit bureau. You may also contact the Consumer Financial Protection Bureau (CFPB) for further assistance.

This could be a sign of identity theft according to Experian, one of the three major credit bureaus. At the very least, you’ll want to look into it and understand what’s going on.

Keep in mind, you can only dispute hard inquiries that occur without your permission. If you’ve authorized a hard inquiry, it generally takes two years to fall off your credit reports.

How to minimize the impact of hard credit inquiries

When you’re buying a home or car, don’t let a fear of racking up multiple hard inquiries stop you from shopping for the lowest interest rates.

FICO gives you a 30-day grace period before certain loan inquiries are reflected in your FICO® credit scores. And FICO may record multiple inquires for the same type of loan as a single inquiry as long as they’re made within a certain window. For FICO scores calculated from older versions of the scoring formula, this window is 14 days; for FICO scores calculated from the newest versions of the scoring formula, it’s 45 days.

Similarly, the VantageScore model gives you a rolling two-week window to shop for the best interest rates for certain loans. “That way, they only impact your credit score once,” the company says.

Bottom line

Your credit scores play a big role in your financial well-being. Before applying for credit, take time to build your credit scores. With stronger credit, you may improve your chances of being approved for the financial products you want at the best possible terms and rates.

To help you keep track of hard inquiries that may influence your credit scores, check your credit report from TransUnion at Credit Karma. While one hard inquiry may knock a few points off your scores, multiple inquiries in a short amount of time may cause more damage.

How To Ask For A Credit Limit Increase?

Raising your credit card's limit boosts the credit you can access, but you'll need to figure out how much to request and how to make your case.

Before we get into how to ask for a credit limit increase, let’s review a more basic question:
What is a credit limit?

A credit limit is the maximum amount your credit card issuer will allow you to charge on a single credit account. Pretty simple, right? But what actually happens if you meet or exceed that limit?

If you go over your credit limit, your card issuer may simply decline the transaction. Some card issuers may allow charges that exceed your credit limit, but they typically charge an over-limit fee of up to $25 the first time you go over your limit and up to $35 if you do it again within six months. Heads up: A card issuer can’t charge an over-limit fee unless you’ve agreed to permit over-limit charges on your card.

Spending more than your credit limit may come with other consequences, as well. Your card issuer may decrease your credit limit if you’re a repeat offender, and your required payment may increase because you’ll have to pay the amount you spend over your limit in addition to your minimum payment.

Common question:

How do credit card issuers determine my credit limit?

A credit card issuer will assess your credit history, income and how much existing debt you have. They will set your credit limit based on those and other factors. Typically, the better your credit history, the higher your credit limit will be.

The good news? Your credit limit can also swing the other way. In some instances, if you’re a responsible spender and routinely pay off your balance on time, the card issuer might automatically raise your credit limit even if you didn’t ask for an increase.

But card issuers don’t always automatically increase your credit limit. If you want a credit limit increase, most of the time you must be proactive. This means calling your card issuer and explaining why you deserve an increase to your credit limit.

Sound intimidating? Don’t worry. We’ve put together a step-by-step guide for how to ask for a credit limit increase. Check it out below.

How to ask for a credit limit increase

1. Ask yourself why you want a credit limit increase

2. Know your credit history

3. Gather the documents you’ll need when you ask for a credit limit increase

4. Make your case

1. Ask yourself why you want a credit limit increase

If you’re thinking about asking for a credit limit increase on your credit card, the first step is to assess your current financial situation. Consider the pros and cons of a credit limit increase.

On the plus side, a higher credit limit may lower your credit utilization rate if you keep your balance under control, says Bruce McClary, vice president of public relations and communications at the National Foundation for Credit Counseling.

Credit utilization is the amount of available credit you’re using out of your overall credit limits. It’s one of the factors that make up your credit scores. Most experts recommend keeping your overall credit utilization below 30%. Lower credit utilization rates suggest to creditors that you can use credit responsibly without relying too heavily on it.

You can figure out your credit utilization rate by dividing your total credit card balances by your total credit card limits. Having a higher credit limit on one or several card accounts can help keep your utilization rate below 30%.

Then again, a higher credit limit could also lead to trouble. A higher limit may lead some to feel that there is that much more room to spend.

As is usually the case, it’s best to spend responsibly and within your means. Just because a higher credit limit may allow you to charge an expensive electronic device or pay for a vacation doesn’t mean that asking for a higher limit is the right option for you.

It’s not a good idea to request a credit limit increase for an impulse purchase, especially if the item is not a necessity. Card issuers may also view applying for a mortgage or auto loan right before requesting a credit limit increase as an indication of a high-risk customer, he notes, because it could indicate that you’re about to take on a large amount of debt.

2. Know your credit history

This is one step we can definitely help with. Get your free VantageScore credit scores and reports from two major credit bureaus at Credit Karma to help figure out your next move. And don’t worry — checking your credit scores on Credit Karma is a soft inquiry, which will never affect your credit.

Heads up, though: When you request a credit limit increase from your credit card company, it may perform a hard inquiry to determine your eligibility. This can affect your credit scores. A hard inquiry from a credit limit increase request is a normal part of the process of applying for new or additional credit.

A hard inquiry remains on your credit reports for approximately two years and may impact your credit scores for one year or more depending on the scoring model used. The impact can vary widely depending on the rest of your credit. For example, if you don’t have very much credit history established, a hard inquiry may impact you more.

For example, one hard inquiry may not affect your credit scores at all or it may decrease your scores by less than five points. On the other hand, if you have only a few accounts or a short credit history, hard inquiries can have a greater impact on your scores. That’s why you should know your credit history before you ask for a credit limit, especially if you’re expecting additional hard inquiries from any other credit requests.

So, how much will asking for a credit limit increase hurt my credit scores?

One hard inquiry resulting from your credit limit increase request will typically only result in a minor dip in your credit scores. There are many different types of scoring models, so a person doesn’t have just one credit score. Credit scoring models are proprietary, so it’s impossible to know exactly how many points a credit score will change as a result of a hard inquiry.

3. Gather the documents you’ll need when you ask for a credit limit increase

Your card issuer may want to know your current annual income, employment status and how much you pay for housing each month. Have that information ready to go before you call.

That’s right, we said call. You can sometimes ask for a credit limit increase by applying on your card issuer’s website, but you’ll have a better opportunity to ferret out information if you speak to a representative on the phone.

If you request an increase over the phone, you’ll be able to talk to the representative and ask questions or see if there’s an amount of additional credit you could get without a hard inquiry, so that may be better in certain situations.

4. Make your case

When asking for a credit increase, it’s a good idea to stick to the basics, says McClary. Keep the request simple and straightforward.

Here are some tips for how to go about it.

• Have your talking points prepared beforehand, such as why you want the increase and how much of an increase you’d like.

• Make a list of questions you want answered before committing to the request. For example, will you be able to ask for another credit limit increase later if you want one? Will this request result in a hard inquiry on your credit reports?

• Be polite and explain why you’re asking for a credit limit increase. Don’t lose your cool if things aren’t going your way or if the representative has an attitude. Instead, consider getting off the call and trying again later with a different agent.

• If you don’t succeed, ask why. You’ll want to know the exact reason the increase was denied so you can work on creating a situation where you’re more likely to be approved. If you’re juggling too many high balances, for example, create a plan to pay them down. Once you’re in a better position, you can try again.

Most of the factors that will determine success are determined before the conversation begins, says McClary. “What you say may not increase the likelihood of approval if you are working against a low credit score or a poor payment history with that creditor.” Still, saying the right things certainly won’t hurt your case.

If you get a credit limit increase, you may improve your credit scores by lowering your credit card utilization rate and keeping the balance low. At the same time, having more credit available could be so tempting that you end up with more credit card debt than you can comfortably pay off. If you’re careful to not take on more than you can handle, a higher limit allows you to make large purchases more efficiently, possibly racking up more rewards points along the way.

Before you ask for a credit limit increase on your credit card, first assess your current financial situation. Be honest with yourself about why you want a higher credit limit. Then, if you still think a credit limit increase is in your best interest, contact your card issuer and make your case.

6 Ways To Lower Your Credit Card Utilization

Your credit utilization rate, the amount of available credit you use at any given time, is one of the most important factors in determining your credit scores. Here are ways you can lower it.

You’ve heard you should keep your credit card utilization under 30%. Here’s why it’s important and how you could do it.

Your credit utilization— the percentage of your credit limit that you’re using—is one of the most important factors in determining your credit scores. Because a high utilization rate could indicate you’ll have trouble paying your bills on time, a lower utilization rate is generally best for your credit scores.

There are several ways to change your balance or available credit. This can help you improve your credit utilization rate and your credit as a result.

1. Pay down your balance early.

2. Decrease your spending.

3. Pay off your credit card balances with a personal loan.

4. Increase your credit limit.

5. Open a new credit card.

6. Don’t close unused cards.

Credit card utilization rates (also known as credit utilization ratios) are relatively simple to calculate. First, look for the credit limit on your credit card account. Then divide the balance on your monthly statement by your credit limit, and that’s your credit utilization rate.

So, if you have a $5,000 credit limit and spend $1,000 during your billing period, your credit utilization rate will be 20% ($1,000 divided by $5,000 – multiply that number by 100 get the percentage.)

If you have several credit cards, you can combine the balances and divide that number by the combined credit limits to find your overall credit utilization rate.

Lowering your credit utilization rate could be a great way to boost your credit.

Unlike some other credit score factors, “utilization is a powerful tool for improving your credit in a short time frame,” says Sarah Davies, senior vice president of analytics, research and product management at VantageScore.

It can take months or years for your scores to recover after a late payment or bankruptcy. However, “if you could pay down all your credit cards in one month, your credit could improve dramatically,” Davies says.

Whether you’re looking for a quick boost or want to learn how to sustain good credit, here are six ways to lower your credit utilization rate.

1. Pay down your balance early.

One tricky point about credit card utilization rates is that your usage depends on the balance that your card’s issuer reports to the credit bureaus, not how much you spend each month. Those two numbers aren’t always the same.

Also, your issuer may not even report to all three of the major credit bureaus, Equifax®, Experian® and TransUnion® — and in some cases, it may not report to any of them.

Typically, issuers report the balance at the end of your billing cycle.

However, some issuers may send the data at the same time each month for all cardholders, regardless of when your billing cycle ends. Your best bet may be to ask your issuer so you can be certain.

What this means is that your issuer may report your billing cycle’s balance before you pay it off. This reported balance will add to your credit utilization.

However, if you pay down part, or all, of your balance before issuers report your balance for the billing cycle, your credit utilization rate for that card will go down.

2. Decrease your spending.

If you’re working to pay down credit card debts and can’t afford to make partial or full payments early, it can be helpful to stop using your credit cards to make purchases. Otherwise, your new purchases may offset your payments, and your credit utilization rate won’t go down.

Switch to a debit card or cash for your regular purchases, and as you make credit card payments to pay off debt, your credit utilization rate could drop.

3. Pay off your credit card balances with a personal loan.

Because credit utilization rates are a reflection of how you use revolving credit, you could take out a personal loan, pay off your credit cards and effectively move the debt to an installment loan (potentially with a lower interest rate than your credit cards). 

Common Question:

What is an installment loan?

An installment loan is a loan that you repay with a set number of scheduled payments over time. Types of installment loans include auto loans, mortgages and personal loans.

However, there are multiple drawbacks to this approach. You’ll need to qualify for the loan and may have to pay an origination fee on the money you borrow.

And to qualify for the best interest rates on a personal loan, you need to have excellent credit (in addition to other factors). If you have average or poor credit, the interest rate on the personal loan may be higher or lower than that on your credit card(s).

4. Increase your credit limit.

Another way to improve your credit utilization rate is to increase your credit limit.

You can call your credit card’s issuer to request a credit limit increase, or you may be able to make the request online. Your card’s issuer may have criteria you need to meet, such as having your account for a specific period of time.

The lender will likely also base its decision on your usage and payment history with the card – so if you have a history of late payments, you’re unlikely to be approved for a limit increase.

Requesting a credit limit increase can result in a hard inquiry, even if the issuer doesn’t approve your request. The inquiry could ding your credit slightly depending on the rest of your credit, although this impact can vary widely depending on the rest of your credit. For example, if you have little credit history, a hard inquiry may impact you more.

5. Open a new credit card.

Another way to increase your available credit is to open a new credit card.

You won’t necessarily know what the credit limit will be until after you’re approved because it depends on the issuer’s consideration of multiple factors, such as your income and credit history. Some cards may have a minimum credit limit.

For example, some Visa Signature® and World Elite Mastercard® cards have a minimum $5,000 credit limit. But even with these types of cards the minimum limit can depend on the card or issuer and you won’t necessarily get a high credit limit.

As with requesting a credit limit increase, applying for a new card generally results in a hard inquiry regardless if the issuer approves your application.

6. Don’t close unused cards. 

As you take steps to get your credit in order, you may want to clear out financial clutter by closing credit cards that you don’t often use.

While this could make managing your wallet easier, closing an account can also lower your available total credit and increase your credit utilization rate.

Managing your credit utilization rate can be a simple way to help improve and maintain your credit. Focus on both parts of the equation — your balance and your credit limit — and look for ways to decrease and maintain a low ratio for the best possible impact.

While recovering from a late payment or another derogatory mark can take months or years, lowering your credit utilization rate could result in a quick, significant improvement in your credit.

Does Checking Your Own Credit Score Hurt Your Credit Score?

Credit can be a confusing concept. But if you want to understand your credit scores, you can start by focusing on high-impact factors like your credit card utilization, payment history and any derogatory marks on your reports.

According to TransUnion’s July 2017 credit literacy survey, a lot of people think so. Of the 1,002 U.S. consumers included in the survey, nearly half thought that checking your own credit scores has the same effect as when a lender checks them.

Fortunately, this isn’t the case. As many know, checking your credit scores on Credit Karma is reported as a soft inquiry and it won’t negatively impact them.

But that got us thinking: What other questions or misconceptions do people have about credit? The factors that actually make up a credit score may be a lot different from what you think.

Let’s dig a bit deeper.

What’s in a credit score?

Below are the factors that are typically used to calculate your credit scores, by the level of impact they can have on your scores. Because there are different credit scoring models, how factors are weighted can vary slightly from model to model.

High impact

Credit card utilization: This refers to how much of your available credit you’re using at any given time. It’s determined by dividing your total credit card balances by your total credit card limits.

Most experts recommend keeping your overall credit card utilization below 30 percent. Why? Because lower credit utilization rates suggest to creditors that you can use credit responsibly without relying too much on it. Individuals whose credit card utilization soars above 30 percent may be more likely to fail to repay their loans than those who keep their balances low.

Another benefit of keeping your utilization low? Having available credit can help if something unexpected arises which you then have to pay for.

Payment history: This is represented as a percentage showing how often you’ve made on-time payments. Paying bills on time shows lenders and creditors that you’re reliable and more likely to pay back your debts.

Late or missed payments can significantly harm your credit scores, so it’s important to try to pay all your bills on time.

Derogatory marks: As of July 1, 2017, about half of all tax liens and nearly all civil judgments have been removed from consumers’ credit reports. That’s good news, because having those derogatory marks on your reports can lower your credit scores. Other derogatory marks that may affect your credit include accounts in collections, bankruptcies and foreclosures.

Medium impact

Age of credit history: This factor shows how long you’ve been managing credit. It doesn’t refer to — as some may think — your actual age.

While your average age of accounts isn’t typically the most important factor used to calculate your credit scores, it’s important to think about. Closing your oldest credit card account, for example, could end up negatively impacting your scores.

To sum up: The longer you manage your credit responsibly, the more you demonstrate your creditworthiness to lenders.

Low impact

Total accounts: This refers to the number of credit cards, loans, mortgages and other lines of credit you have.

Lenders generally like to see that you have used a mix of accounts on your credit responsibly. It generally shows that other lenders have trusted you with credit.

Hard inquiries: Hard inquiries usually occur when you apply for a new line of credit, such as a loan, credit card or mortgage, but can also take place when, for example, you rent an apartment.

A lot of hard inquiries on your credit reports within a short time period may suggest that you’re desperate for credit or aren’t getting approved by other lenders.

Hard inquiries can slightly lower your credit scores. It might seem counterintuitive: To build your credit, you need lines of credit — so why should your credit scores take a hit because you applied for a new account?

Some experts say that any time you take on a new credit obligation, there’s an element of risk involved. Credit models see that and want to understand if you’re able to handle that new obligation.

After you’ve made on-time payments for a few months, the impact of that hard inquiry should go away or diminish, experts say.

What Factors Affect A Credit Score?

From opening new accounts to making a late payment, there are a lot of things that can affect your credit scores. Learn which factors are generally most important, and which may only have a minor impact on your scores.

If you have a goal to reach a particular score or just want to learn more about credit scores in general, it’s important to know what affects your credit scores and how your actions could improve or hurt your creditworthiness.

Although there are many credit scoring models, all the scores are trying to figure out the same thing — the likelihood of you paying your bill on time, or even at all. And whether you’re looking at a FICO® or VantageScore® credit score, your scores are based on the same information: the data in your credit reports.

While various credit scoring models may weigh each factor differently, the leading ones, FICO® and VantageScore®, place similar relative importance on the following five categories of information. We’ve ranked them by which ones are often most important to the average consumer.

1. Most important: Payment history

Your payment history is one of the most important credit scoring factors.

Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them. The effects of missing payments can also increase the longer a bill goes unpaid. So a 30-day late payment might have a lesser effect than a 60- or 90-day late payment.

How much a late payment affects your credit can also vary depending on how much you owe. Don’t worry though, if you start making on-time payments and actively reduce the amount owed, then the impact on your scores can diminish over time.

If you’re having trouble making payments at all, you could also wind up with a public record, such as a foreclosure or tax lien, that ends up on your credit reports and can hurt your scores. Sometimes a single derogatory mark on your credit, such as a bankruptcy, could have a major impact.

2. Very important: Credit usage

Credit usage is also an important factor, and it’s one of the few that you may be able to quickly change to improve(or hurt) your credit health.

The amount you owe on installment loans — such as a personal loan, mortgage, auto loan or student loan — is part of the equation. However, even more important is your current credit utilization rate.

Your utilization rate is the ratio between the total balance you owe and your total credit limit on all your revolving accounts (credit cards and lines of credit). A lower utilization rate is better for your credit scores. Maxing out your credit cards or leaving part of your balance unpaid can hurt your scores by increasing your utilization rate.

Sarah Davies, senior vice president of analytics, research and product management at VantageScore®, says that for VantageScore® credit scores, your overall utilization rate is more important than the utilization rate on an individual account.

However, utilization rates on individual accounts can also affect your credit scores. This means you should pay attention to not just your overall credit utilization, but also the utilization on individual credit cards. Having a lot of accounts with balances might indicate that you’re a riskier bet for a lender.

Keep in mind that you can pay your bill in full each month and still appear to have a high utilization rate. The calculation uses the balance that your credit card issuers report to the bureaus, often around the time it sends you your monthly statement. You may have to make early payments throughout your billing cycle if you want to use a lot of credit and maintain a low utilization rate.

3.  Length of credit history

A variety of factors related to the length of your credit history can affect your credit, including the following:

• The age of your oldest account

• The age of your newest account

• The average age of your accounts

• Whether you’ve used an account recently

Opening new accounts could lower your average age of accounts, which may hurt your scores. However, the hit to your scores could also be more than offset by lowering your utilization rate and by increasing your total credit limit, making sure to make on-time payments to the new card and adding to your credit mix.

Closed accounts can stay on your credit reports for up to 10 years and increase the average age of your accounts during that time. But once the account drops off your credit reports, it could lower this factor, and hurt your scores. The impact could be more significant if the account was also your oldest account.

4. Credit mix and types

Having experience with different types of credit, like revolving credit card accounts and installment student loans, may help improve your credit health.

Since your credit mix is a minor factor, you probably shouldn’t take out a loan and pay interest just to add to your credit mix. But if you’ve only ever had installment loans, you may want to open a credit card and use it for minor expenses that you can afford to pay off each month.

5.  Recent credit

Creditors may review your credit reports and scores when you apply to open a new line of credit. A record of this, known as an inquiry, can stay on your credit reports for up to two years.

Soft inquiries, like those that come from checking your own scores and some loan or credit card prequalifications, don’t hurt your scores.

Hard inquiries, when a creditor checks your credit before making a lending decision, can hurt your scores even if you don’t get approved for the credit card or loan. But often a single hard inquiry will have a minor effect. Unless there are other negatives marks, your scores could recover, or even rise, within a few months.

The impact of a hard inquiry may be more significant if you’re new to credit. It can also be greater if you have many hard inquiries during a short period.

Don’t be afraid to shop for loans, though. Credit scoring models recognize that consumers want to compare their options. So multiple inquiries for mortgages, auto loans and student loans from a single 14- to 45-day period (depending on the loan and credit scoring model) may be treated as a single inquiry when calculating your scores.

Bottom line

There are many credit scores, and you may not know which one a lender is going to use when considering your application. However, consumer credit scores, which are determined based on the information in your consumer credit reports, weigh factors in a similar manner. If you focus on improving these factors, you could improve your credit health across the board.