Finance

Hard and soft inquiries that you need to know about credit cards

There are three major American companies that maintain a detailed report of your credit standing and repayment history. This data can be requested for by banks, money lenders, credit card companies, employers and so on. Let us take a look at when hard credit inquiries are essential and when soft credit inquiries may be initiated and by whom.

Hard credit check inquiries are normally mandatory

  • when you have applied for an automobile loan
  • when you apply for a home loan
  • when you apply for an educational loan
  • as part of a credit card request application
  • when applying for a mortgage of your property

A hard credit check inquiry may be requested when

  • your identity needs to be verified by a stock trading Bureau
  • you require a telephone or internet connection
  • you wish to open a checking, savings or a money market account in any bank
  • you wish to increase your available credit limit

Soft credit inquiries are usually mandated when

  • you wish to ascertain your credit score
  • you wish to avail of a loan or a credit card offer that has already been pre-approved by the financial institution or the bank in question-based on your past transactions with them
  • A prospective employer wishes to check you overall background as part of the vetting process to determine if you would be suitable for the job in question and whether you can be trusted with specific responsibilities.

Though not essential, a soft credit inquiry may also be initiated in the following situations:

By a landlord whose property you wish to lease or rent

By a telecommunications company when you request for a telephone or internet connection

By a banker with whom you wish to open an account of any kind

A hard check cannot be initiated unless it has been authorized by you post your application for a loan, mortgage or credit card. A soft credit inquiry may not require your authorization.

Credit scores that are obtained from a hard inquiry may affect your overall credit standing adversely. Most soft inquiries, including those where you wish to assess your own credit score have no adverse impact on your credit standing.

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