Credit is a topic that has several different facets that make it up. One factor that makes up a credit score (as much as 10 percent) is an inquiry. An inquiry is the beginning stage of beginning a new line of credit and shows how one is looking to seek a new line of credit.

A credit inquiry is a request by an institution for credit report information from a credit-reporting agency. Credit inquiries can be from all types of entities for various reasons, but they are typically made by financial institutions. They are classified as either a hard inquiry or a soft inquiry. Hard inquiries are a key part of the underwriting process for all types of credit. Soft inquiries help credit companies to market their products and can be used to help consumers and are good for reviewing with customers/clients.

Hard inquiries are requested from a credit bureau whenever a borrower completes a new credit application. They are retrieved using a customer’s Social Security number and are required for the credit underwriting process. Hard inquiries provide a creditor with a full credit report on a borrower. This report will include a borrower’s credit and details on their credit history. These are typically displayed on a credit report for approximately 24 months before falling off. Hard inquiries can be harmful to a borrower’s credit score. Each hard inquiry usually causes a small credit score to decrease for a borrower. Hard inquiries remain on one’s credit report for two years. Generally, a high number of hard credit inquiries in a short period of time can be interpreted as an attempt to substantially expand available credit, which creates higher risks for a lender. Hard inquiries can be harmful to a borrower’s credit score. Each hard inquiry usually causes a small credit score to decrease for a borrower. Hard inquiries remain on one’s credit report for two years. Generally, a high number of hard credit inquiries in a short period of time can be interpreted as an attempt to substantially expand available credit, which creates higher risks for a lender, usually within a window of 14-45 days. For those unable or unwilling to wait two years and who are comfortable paying a small fee, one of the best credit repair companies might be able to get the hard inquiries removed from a credit report sooner. In some instances, hard inquiries also may be used for situations other than a credit application. An employment background check and a lease rental application are two instances in which a hard inquiry also may be required. In some instances, hard inquiries also may be used for situations other than a credit application. An employment background check and a lease rental application are two instances in which a hard inquiry also may be required.

Soft inquiries are not included in a credit report. These inquiries can be requested for a variety of reasons. Credit companies have relationships with credit bureaus for soft inquiries that result in marketing lists for potential customers. These soft inquiries are customized by the credit company to identify borrowers who meet some of their underwriting characteristics for a loan. Credit-aggregating services also use soft inquiries to help borrowers find a loan. These platforms require information about a borrower, including their Social Security number, which allows for soft inquiries and prequalification offers. Many lenders also will provide a borrower with quotes through a soft inquiry request that can help them understand potential loan terms. Personal credit reports are also obtained through soft inquiries. Individuals have a right to obtain free annual credit reports from credit reporting agencies that detail their credit information. Individuals can also sign up for free credit scores through their credit card companies. These credit scores are reported to borrowers each month and are obtained by the credit card company through a soft inquiry.

Inquiries are an indicator of what makes up a credit score as well as seeking out new credit. The small components that make up something that most people shy away from are an integral part of your overall credit score. Given this new information may you have a better understanding of how this helps in shaping your credit history for future purchases. Until the next time dear reader. Excelsior!