What is a Soft Inquiry? Here is Everything You Should Know

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There are times when you can be apprehensive about making a credit inquiry due to a common misconception that any credit inquiry can impact your credit score. Thus, it becomes essential to understand what is a soft inquiry and how it is different from a hard inquiry. Such understanding can help you monitor your credit report smartly without affecting your credit score. 

In this write-up, you will get to know more about soft inquiry - its benefits, how it works, and more. Let’s read further!

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What is a Soft Inquiry?

Also referred to as soft credit pull or soft credit check, a soft inquiry takes place when you or an individual that you authorise checks your credit report. This kind of inquiry can take place even when you are not applying for a credit product. 

They are routine checks and can be done due to any of the following reasons -

  • Potential creditors need to get an idea of your creditworthiness for pre-approved credits.
  • You may want to check your credit rating often.
  • A potential employer wants to check your background during the hiring process.
  • Your existing creditor wants to verify your creditworthiness. 

It is important to note that you cannot extract extensive information like in the case of a hard credit check. A soft check can be often done by you and lenders without hampering the credit score. 

Benefits of Soft Inquiry

Here are some benefits of soft inquiry -

  • It helps in understanding how a credit score is reported by al etihad credit bureau (AECB).
  • Since soft inquiries get displayed on your credit reports, you can get an idea about what things are your potential and existing lenders are taking into account while extending you a credit product. 
  • It helps the lender to extend you pre-approved loans or credit cards at favourable rates.
  • A soft inquiry on credit reports also helps in determining the insurance premium rates you should be offered.
  • Soft queries are transparent and help you know who checked your credit report. It can also help you identify if someone misused your credit information for purposes like identity theft. 

How Does Soft Inquiry Work?

Creditors and banks may often want to know if you are managing your debts and credit rating strategically. For this, they usually end up performing a soft enquiry on a credit report. Through this, they manage to find out information like your credit history, late payments, or your limit of credit usage. 

Soft inquiries often do not pose any threat to your credit rating. When a lending or financial information performs a soft inquiry, they can check the following information from your credit report -

  • Your existing debt or credit
  • Your payment history
  • Any existing loans

Note - Some inquiry applications can either result in soft inquiry or hard inquiry based on their nature. If you want to know the inquiry process that a company plans on using, it is advisable to connect with them directly. 

How Does Soft Inquiry Impact Your Credit Score?

By examining the data in your credit report, credit scoring models create your credit score. Your credit scores are unaffected by soft inquiries.

Hard inquiries can lower your credit scores and stay on your credit reports for up to two years. However, the effects are often minor, and if no new bad information is submitted to your credit report, credit scores usually recover within a few months. Most scoring models only take into account challenging questions from the past 12 months when determining your results.

More recent hard queries can lower your credit scores more significantly. Nevertheless, based on the type of AECB credit score, credit scoring algorithms frequently aggregate (or "deduplicate") many queries from a 14- to 45-day period in order to avoid penalising customers who are rate shopping.

Difference Between Hard and Soft Inquiries

Discussed below are the major differences between hard and soft inquiries -

Basis

Soft Inquiry

Hard Inquiry

Meaning 

Routine process where you or any third party (usually employer, potential lender. or existing lender) can pull out your credit history or information about your current debts

Conducted when you apply for personal loans, auto loans, home loans, or any other credit. It is conducted by financial institutions to pull out a detailed report on your creditworthiness. 

Impact on Credit Score

Does not impact your credit score 

Significant effect on your credit score 

Who Can Perform the Inquiry?

Anyone can perform a soft inquiry - your approval is not necessary

This kind of inquiry is often performed by lenders or financial institutions when you apply for a loan. 

When Is It Performed?

A soft inquiry can be done for activities like -

  • Pre-approval of a new credit 
  • Employers checking your background 
  • You checking your own credit report to monitor any illegal activity

A hard credit check can be done for the following -

  • Getting approval for new credit products
  • Rate shopping

Things to Consider About a Credit Inquiry

Here are some things that you should take into consideration regarding your credit inquiry -

  • If you are apprehensive about the impact hard credit checks can have on your credit score, avoid applying for loans and credit cards that you may not require. 
  • Confirm with the company or financial institution if applying for a new bank account or initiating a new mobile phone EMI contract will lead to a hard credit inquiry. 
  • If you see a hard credit check on your credit report that you cannot recognise, instantly connect with the financial institution that initiated it. It is because, at times, such an inquiry could be a fraudulent activity. 

To know more about soft inquiry and the related aspects, read the following FAQ section.

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How long does a credit inquiry remain on your credit report?

A credit inquiry remains on your credit report for 12 to 24 months, depending on the type of inquiry. 

Should you be worried about soft inquiries?

You should not be worried about soft inquiries as they do not impact your credit score. They usually do not leave any visible trace on your credit report.

How can you check your credit score in the UAE?

You can check your credit score either by making a request to AECB and paying a nominal fee to get the score or by sending a request on policybazaar.ae to check your credit score for free.

Can a soft inquiry be conducted without your knowledge?

Yes, a soft inquiry can be conducted without your knowledge. 

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