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 pre-approved 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.