Your credit score will drop when a hard inquiries are also known as hard pulls occur.  This happens when a creditor checks your credit for the purpose of giving you a loan or credit card. A soft inquiry, or soft pull, is where you or a company is simply looking for information without your seeking credit. A hard inquiry can affect your credit score and remain on your credit report for two years.

But what does that means? Because hard inquiries can potentially drop your credit scores, they can result in your paying higher interest rates on loans. On large loans, like those for a car or home, a score drop of even a few points can mean you end up paying out more money over the life of the loan.

What Is a Credit Inquiry and Why It Matters?

Credit inquiries happen when you or a business accesses your credit report. Let’s say you apply for a car loan, and the lender requests your credit report and score from Experian. The fact that your credit information was used by a particular company is noted on your Experian report. This includes the date, name of the company that requested it and the type of inquiry that was made. Or maybe you get a pre-approved credit card offer in the mail, that is also a credit inquiry.

Before we get into the specifics of the types of inquiries and how they work, it’s important to put them into perspective. Unless you have been shopping heavily for credit—more on that in a moment—inquiries shouldn’t have a significant impact on your credit scores.

New credit, which includes inquiries as well as new credit accounts, makes up just 10% of your FICO score. As a result, a single inquiry is likely to drop your score by less than five points. But only if it’s a hard inquiry and with the limits described below.

While inquiries remain on your credit reports for two years, older ones are ignored. Due to the majority of score models used these days, only those that occur within the past year count.

More About a Hard Inquiry and the Damage it Does

A hard inquiry shows creditors that you applied to get credit somewhere else, whether that’s a car loan, mortgage, student loan or credit card. A hard credit inquiry can also reduce your credit score from five and ten points. So, be mindful of the credit you apply for, how many times you apply and how often, because each inquiry is added to your report. And multiple hard inquiries on your credit report can reduce it five to ten points per inquiry. This can mean the difference between fair credit and poor credit.

However, if as long as you have multiple hard credit inquiries from the same company in a short amount of time. These inquiries won’t affect your credit score as much. Inquiries such as an auto, mortgage, or student loan lender

What Is a Soft Credit Inquiry and Why These are Good

Soft credit inquiries, otherwise known as soft pulls, aren’t generated by shopping for credit and don’t affect your credit scores. A lender who sends you a preapproved credit offer without you’re applying is a soft credit inquiry.

Checking your own credit score is also a soft credit inquiry. Similarly, if you already have a credit card or loan with a lender, they may review your account from time to time. The resulting account review inquiry won’t show up when lenders request your reports or scores.

Any inquiries by an employer or an insurance company checking your credit history are ignored for the purposes of calculating your scores. If you’re unsure where your credit stands? You can check your Experian score for free on Checking your score won’t affect your score or your credit reports.

A soft credit inquiry gives the same information that a hard credit inquiry does. This is including your payment and credit history, debt management, any derogatory marks you may have and your credit score.

Soft inquiries occur without your even knowing. If you’re unsure of the type of pull or inquiry a company is going to make on your credit: Ask them if it will be a hard credit inquiry or a soft credit inquiry. You can then check with the three credit bureaus to determine if the information you were given regarding the inquiries is accurate.

How Can I Keep My Credit Scores from Dropping Lower?

There are several ways to minimize the likelihood that your scores will drop due to hard inquiries, including the following.

Shop Around Quickly – Time Is of the Essence

Looking for a mortgage, car loan or student loan? It’s a good idea to limit your shopping to a two-week period. If you do, it’s likely those applications will count only as a single inquiry. That’s because most scoring models count all inquiries of one of those types as one. Provided that they take place within a 14- or 45-day period, depending on the model being used.

Monitor Your Credit Wisely

It is wise to check your credit report and credit scores before you shop for any kind of credit. You should then do your homework and try to apply for loans and credit that you’re more likely to qualify for.

If you review your credit reports and see a hard credit inquiry or hard pull listed. But you don’t recognize the name of the company: Make sure it’s not a promotional credit inquiry. If it is, you were probably sent an offer for preapproved credit, and have nothing to worry about.  But If that’s not the case, the contact information for that company should be listed on your report so you can get in touch with them. If that information isn’t provided, be sure to ask the credit reporting agency for it. From there, you can work together to remove the error from your credit report.

You can opt out of preapproved offers on the Federal Trade Commission website to ensure you don’t get any offers.

How to Monitor My Credit and Improve if Possible

Monitoring your credit is relatively easy. It’s something you want to do regularly to help guard against or fix instances of fraud or identity theft. It also goes a long way in helping you to find any inaccuracies on your credit reports. This is so you can report them and possibly have the damaging record removed and help improve your credit score.

Some people overlook monitoring the hard credit inquiries found on their credit reports because they think hard inquiries don’t carry much weight. Not the case.

Looking at all of the inquiries made on your credit reports, including hard pulls and soft pulls, shows you who’s pulling your credit. They can also tip you off to any accounts that have been opened that you aren’t aware of or you didn’t authorize.

Removing Inquiries from Your Credit Report?

Soft credit inquiries don’t negatively affect your credit score, but hard credit inquiries can. If you want to remove hard credit inquiries from your credit report, you have to dispute the hard inquiry with the creditor. Or dispute the hard inquiry with the three credit bureaus.

If not disputed or removed, hard credit inquiries stay on your credit report for up to two years. Each time a hard pull is made, it can be reported by any or all three of credit bureaus—Equifax, Experian and TransUnion depending on the credit pull. Therefore, every time it’s reported and logged, it can have damaging effects on your credit score.

Hard credit inquiries also account for approximately ten percent of your total score. To begin the process of removing the hard inquiry, contact the creditor that performed the inquiry and ask that the creditor remove it. You can also dispute the inquiry and say that you never authorized it.

If you choose to dispute that you authorized the hard pull on your credit report, the creditor has to provide proof. Proof that you authorized the hard credit inquiry it made on your account. When you dispute a hard inquiry with the credit bureaus, you also have to claim and prove that you didn’t authorize the creditor to make the inquiry. Authorization takes the form of you applying for credit with that creditor.

After disputing with the credit bureaus, a fraud alert may be placed on your credit account. Then after that, every time you apply for credit in the next ninety days, creditors have to verify your identity before giving you any type of credit. Which can only be a good thing anyway.