Differences between hard and soft credit inquiries

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Differences between hard and soft credit inquiries
3 years ago
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While the difference between hard and soft credit inquiries might appear to be small and insignificant, the manner in which they impact your credit score is huge. The primary difference between these two types of inquiries is that soft credit inquiries are not initiated by the consumer while hard credit inquiries are initiated by the consumer.

Soft Credit Inquiries
Soft credit inquiries are not initiated by the consumer and therefore, they do not create an impact on his credit score. It is as if they never happened. These are initiated by credit card companies that are looking for consumers to include on their mailing lists. The mailing lists are comprised of individuals who will receive offers of credit. Additionally, some credit card companies will place these consumers on a phone list as long as they have not placed a request to be listed on the ?úDo Not Call??list.

Hard Credit Inquiries
Hard credit inquiries are initiated by the consumer and as such, they will have an impact on the individual's credit score. When a consumer applies for any form of credit, he is initiating a hard credit inquiry. The credit that is being applied for can take the form of credit cards, installment loans, store credit accounts, mortgages, car loans, student loans, and more. The lender checks into the credit history of the consumer to determine whether he is credit worthy or not. This creates a small negative impact on the credit score itself, which will suffer a slight decrease in numerical value.

If too many hard credit inquiries occur within a short time span, the consumer can lower his credit score significantly. In fact, this type of activity can decrease his chances for obtaining any new forms of credit at least for the time being.

Strategies to Avoid Negative Credit Score Changes When Applying for Credit
Avoiding negative credit score changes due to hard credit inquiries is simple enough if you plan ahead. You need to conduct a bit of research before you actually apply for the credit and initiate the hard inquiry. Check out all of your available options before you submit any applications and then only submit one at a time. If you are denied credit, then you can submit another application. This strategy minimizes the negative impact that a search for credit can have since you minimize the number of applications that you submit.

In order to better identify which credit cad you should apply for, take a look at several facets connected to the account. Does it include a default clause or a universal default clause? Select the one with the simple default clause since that presents a better scenario for you should you default on the card. What is the APR associated with the card? You will want to select the credit card with the lowest APR listed in order to lower the overall cost of the credit.

If you are turned down on the first request because your credit score is too low, avoid the temptation to submit another application right away. Instead, try to build up your credit score a bit first. Remember that each time you apply for credit, you lower your credit score a tiny bit. If you wait at least three months before applying again, the negative impact will be minimal.

Make all of your bill payments on time. Pay the minimum amount due each and every time. Pay more than the minimum amount due on the credit cards with the highest interest rate since that will lower your monthly debt more quickly than paying down the credit card with the lowest interest rate.
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