Hard vs. Soft Credit Inquiries
Hard inquiries are what lenders use when you apply for a loan or credit card. This inquiry will stay on your credit report for up to two years. A single inquiry will likely shave 2 to 8 points from your score.
A couple of points shaved off your credit would normally not be a big deal. But some people seeking preapproved car loans report that their scores have reduced as much as 50 points because of multiple hard inquiries. Such cases aren't the norm, but the even a small drop is trouble for shoppers whose credit score is on the bubble. The loss of just a few points can be the difference between qualifying for a loan with a low APR or one whose rate is considerably higher.
During the dozen years I sold cars, I saw plenty of shoppers miss out on good financing because their score was 7 to 10 points below the acceptance threshold for a particular credit tier. As a consequence, these shoppers had to pay hundreds and sometimes thousands of dollars in extra interest over the life of the loan.
On the other hand, there's the "soft" inquiry, which is a credit check that takes place apart from an actual loan or credit card application. An example would be an employer checking your credit before offering you a job or an insurance company checking your credit before offering you a coverage quote. These inquiries will show up on your credit report, but they won't affect your score.