What Is Soft Inquiry?
A soft inquiry, also known as a "soft pull" or "soft credit check," is a type of review of an individual's credit report that does not affect their credit score. This action falls under the broader category of Credit Reporting within personal finance. Unlike a hard inquiry, a soft inquiry occurs when a person or company checks a credit file for informational purposes, rather than in response to a direct application for new credit.18
Soft inquiries are typically initiated for purposes such as pre-screening for offers, reviewing existing accounts, or when individuals check their own credit report. They are considered "soft" because they are not indicative of a new application for credit and thus do not signal to credit scoring models that a borrower is seeking to take on more debt management. These inquiries may or may not be recorded on a credit report, depending on the credit bureau and the specific nature of the inquiry.16, 17
History and Origin
The concept of credit reporting in the United States has evolved significantly, with formalized systems emerging in the early 20th century to track individuals' financial behaviors and their capacity to repay. Initially, credit checks were less standardized, often involving local merchants sharing information. As consumer credit became more prevalent, particularly after World War II, the need for more systematic credit assessment grew.15
The distinction between soft and hard inquiries became more defined with the establishment of modern credit scoring models and the increasing sophistication of data processing. Regulations like the Fair Credit Reporting Act (FCRA) of 1970 played a crucial role in standardizing how consumer credit information could be accessed and used, emphasizing fairness, accuracy, and privacy.13, 14 The FCRA dictates "permissible purposes" for accessing a credit score and report, which includes both instances where consumer consent is required (often leading to hard inquiries) and those where it is not (often leading to soft inquiries, such as for account reviews or pre-screened offers).12 The Federal Reserve Bank of San Francisco has detailed the historical context of consumer credit development in the U.S., highlighting the innovations that shaped today's financial landscape.10, 11
Key Takeaways
- A soft inquiry is a review of a credit file that does not impact an individual's credit score.
- These inquiries commonly occur when a consumer checks their own credit report or when lenders pre-screen individuals for credit offers.
- Unlike hard inquiries, soft inquiries are not typically visible to other lenders.
- They do not signify an application for new credit, hence their neutral impact on creditworthiness.
- Soft inquiries are a standard practice in various financial and non-financial contexts, including pre-approvals and background checks.
Interpreting the Soft Inquiry
Soft inquiries serve primarily as informational tools. For individuals, seeing a soft inquiry on their credit report often means they have either checked their own credit or a financial institution has reviewed their file for existing accounts or to extend a pre-approved offer. This type of inquiry is generally benign and provides a snapshot of credit health without affecting one's financial standing. Lenders and other entities use soft inquiries to gauge a consumer's credit risk without triggering the negative scoring impact associated with a formal application for new credit card or loan. This allows for targeted marketing and preliminary eligibility assessments.
Hypothetical Example
Imagine Sarah is considering applying for a new mortgage. Before committing to a full loan application, she decides to check her own credit score through a free online service. This action generates a soft inquiry on her credit report. Later, a bank sends her a pre-approved offer for an auto loan. This pre-approval process also involved the bank conducting a soft inquiry on her credit file. In both instances, these soft inquiries appear on Sarah's personal credit report, but they do not cause any reduction to her credit score, allowing her to explore her options without immediate negative consequences.
Practical Applications
Soft inquiries are widely used across several domains, offering a low-impact way to assess credit information.
- Personal Credit Monitoring: Individuals can regularly check their own credit reports and scores without fear of negatively affecting their standing. This is a crucial aspect of responsible personal finance.
- Pre-Approved Offers: Lenders often use soft inquiries to identify consumers who meet certain criteria for pre-approved credit card or loan application offers. This allows them to market effectively without requiring a formal application from the consumer upfront.9
- Account Reviews: Existing creditors may conduct soft inquiries to periodically review the credit health of their current customers. This helps them manage risk and determine eligibility for interest rates changes or credit limit increases.
- Background Checks: In certain situations, such as tenant screenings or employment background checks, a soft inquiry may be performed. While employers generally need written consent for credit report access, these checks are typically soft inquiries and do not impact credit scores.7, 8 The Consumer Financial Protection Bureau (CFPB) provides clarity on the various types of credit pulls and their implications for consumers.6
Limitations and Criticisms
While generally harmless to a credit score, soft inquiries are not without their considerations. One limitation is that while a soft inquiry may indicate that a lender is reviewing your file, it does not guarantee a pre-approved offer will materialize or that you will qualify for any specific product. Furthermore, while soft inquiries themselves do not directly pose a risk to credit standing, the broader landscape of credit reporting and data sharing raises concerns about identity theft and fraud prevention.
The Fair Credit Reporting Act (FCRA) outlines the permissible purposes for which credit bureaus can furnish consumer reports.5 However, the sheer volume of personal data collected and shared by consumer reporting agencies can still lead to privacy concerns for some individuals. The Privacy Rights Clearinghouse, a non-profit consumer advocacy organization, highlights that in-depth background checks, even if soft, could potentially unearth information that is irrelevant, outdated, or taken out of context, raising questions about data accuracy and consumer rights.3, 4 While soft inquiries are a standard part of financial planning, consumers should remain vigilant about how their data is used.
Soft Inquiry vs. Hard Inquiry
The primary distinction between a soft inquiry and a hard inquiry lies in their purpose and their impact on a credit score.
| Feature | Soft Inquiry | Hard Inquiry |
|---|---|---|
| Purpose | Informational; pre-approvals, self-checks, account reviews, some background checks. | Application for new credit (e.g., mortgage, auto loan, new credit card). |
| Impact on Score | No impact on your credit score. | Can temporarily lower your credit score by a few points. |
| Visibility | Visible only to the consumer on their own credit report; generally not visible to other lenders. | Visible to other lenders and remains on the credit report for up to two years. |
| Consent | Often occurs without direct consumer permission (e.g., pre-screened offers) but must have a "permissible purpose" under FCRA. | Requires explicit consumer permission, typically as part of a formal application. |
The confusion between these two types of inquiries often stems from the fact that both involve accessing a credit file. However, understanding that a soft inquiry is a low-impact check, primarily for informational or preliminary purposes, helps clarify why it does not carry the same weight as a hard inquiry, which signals active credit-seeking behavior to credit scoring models.
FAQs
Can a soft inquiry ever turn into a hard inquiry?
A soft inquiry itself does not transform into a hard inquiry. However, a pre-approved offer resulting from a soft inquiry may lead to a hard inquiry if you decide to proceed with the formal loan application or credit account.
How long does a soft inquiry stay on my credit report?
Soft inquiries may or may not appear on your credit report, depending on the credit bureau. If they do appear, they are usually only visible to you and do not affect your credit score, and they typically remain for a shorter period compared to hard inquiries, often less than two years.
Do employers perform soft or hard inquiries?
Employers typically perform soft inquiries when conducting a background check that includes a review of your credit history. They generally need your written consent to do so. These inquiries do not affect your credit score.2
Should I worry about too many soft inquiries?
No, you do not need to worry about the number of soft inquiries on your credit report. Since they do not impact your creditworthiness or credit score, there is no negative consequence to having multiple soft inquiries. Regularly checking your own credit report is, in fact, encouraged as a good personal finance practice.
Where can I see my soft inquiries?
You can see any soft inquiries that are recorded when you request a copy of your own credit report from one of the three major credit bureaus (Equifax, Experian, or TransUnion) or through credit monitoring services. These inquiries are often listed in a separate section from hard inquiries.1