You've probably heard that inquiries into your credit report are bad for your credit score; however, that isn't true for all inquiries. It's important to arm yourself with knowledge about the differences between soft and hard inquiries to avoid doing negative impact to your credit. Your credit report is an important factor in the types of credit you'll qualify for in the future, so it's vital to keep it as strong as possible.
Soft Inquiry
A "soft pull" or "soft inquiry" is when someone checks your credit report but the check isn't being used because you've applied for something that could potentially put you into further debt. Organizations you already have accounts with, those extended unsolicited credit offers or employers may do a soft inquiry on your credit report. When you check your own credit report, it is also considered a soft inquiry.
Effects
A soft inquiry doesn't have any effect on your credit score, and furthermore, it doesn't have any effect on your credit report either. You're the only one who can see these inquiries on your credit report; they're hidden from everyone else's view. The reason your credit score is impacted by hard inquiries is because of they present the possibility that you'll be taking on more debt, whether it's through a loan, credit card or new rental. Since those organizations doing soft inquiries on your report aren't ones you've applied for new credit with, they don't present that risk and, therefore, don't impact your credit score.
Pulling Your Report
Pulling your own credit report is considered a soft inquiry, and you may do so for free by visiting the Annual Credit Report website. The Federal Trade Commission warns that only the Annual Credit Report website is part of the legally mandated annual credit report program---so-called "free credit score" websites may actually start charging you for monitoring services after a certain period of time. You may check your report with each of the three credit bureaus at once, or you may space them out over the year.
Hard Inquiry
A hard inquiry is one that poses the possibility that you may be taking on a new financial obligation. When you apply for a credit card or loan, for example, the lending institution will review your credit report to determine whether you're responsible and able to take on more debt. Other organizations that may pull hard inquiries are cell phone companies and rental companies or landlords. These are considered hard pulls because you would be taking on the financial obligations of a monthly cell phone bill or the rental price of a new home.
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