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What are credit bureau inquiries?

Credit bureaus collect information from creditors in the form of a credit report for an individual. These reports contain information on all credit related activities for the individual like new credit applications, history of payments, available credit limit, utilization etc. There are 3 major credit bureaus in the US – Equifax, Experian and TransUnion. Each bureau has its own credit report and credit score for an individual.

Soft Inquiry

Soft inquiry occurs when a lender wants to market a product.  Lender pulls the credit report to market products to customers. Soft inquiries do not impact the credit score of the customer. Only the customer and the bureau can see the soft inquiries on the credit report and they are not shared with other lenders. Soft inquiries are posted for:

  • Pre-screen offers,
  • Pre-qual checks on issuer website,
  • Free score from issuers

Additional cases of soft inquiries for existing customers:

  • Adding another card with a bank
  • Credit line increase

Hard Inquiry

Hard inquiry occurs when a customer applies for a lending product like a credit card, mortgage or a loan. Lender pulls the credit report to make decision on the application. Too many hard inquires adversely impact credit scores. Hard inquiries stay on the credit report for 2 years but generally impact the credit score for one year. They are initiated by the customer.

Type of trade lines:

  1. Revolving tradeline: These tradelines include credit cards or a line of credit. Entire loan is not disbursed at one time and a credit limit is approved for the individual. Credit is charged against the limit and it is not required to pay the entire outstanding balance every month.
  2. Installment tradelines: These tradelines includes loans where full loan amount is disbursed in one time and a fixed monthly payment is required. Type of loan could be mortgages, auto loans, student loans and personal loans. Monthly payment is determined by the loan amount, tenure of loan and interest rate.