Soft vs Hard Credit Inquiries in Australia: What You Need to Know

When you apply for credit, lenders check your credit report through either a soft or hard inquiry. The difference matters because hard inquiries can lower your score by 5-10 points and stay on your report for five years, while soft inquiries don’t affect your score at all. Understanding this distinction helps you protect your credit rating when shopping for loans, credit cards, or simply monitoring your financial health.

Key Takeaways

  • Soft inquiries don’t affect your score – checking your own credit report, pre-approval offers, and background checks fall into this category.
  • Hard inquiries can lower your score by 5-10 points and remain visible on your credit report for five years in Australia.
  • You can check your own credit report unlimited times without any negative impact on your score.
  • Multiple hard inquiries within 14 days for the same type of credit (like home loans) typically count as one inquiry.
  • Pre-approval marketing offers use soft inquiries , but actual applications trigger hard inquiries .
  • Limit hard inquiries to 2-3 per year to maintain optimal credit health.

What Are Credit Inquiries ?

Credit inquiries happen when someone requests to view your credit report. In Australia, credit reporting bodies like Equifax, Experian, and illion track these requests and include them in your credit file. Every time a lender, employer, or even you check your credit information, it creates a record.

These inquiries serve different purposes and carry different consequences for your score. Knowing which type will occur before you take action can save you from unintended score damage.

Soft Credit Inquiries Explained

Soft inquiries , also called soft pulls or soft searches, don’t require your explicit consent and won’t impact your score. These background checks allow organizations to view limited information about your credit history.

When Soft Inquiries Occur

Personal Checks

  • Checking your own credit report through official channels
  • Using free credit monitoring services
  • Accessing your credit score through banking apps

Marketing and Pre-screening

  • Pre-approved credit card offers in the mail
  • Pre-qualification checks for loans
  • Insurance quote assessments
  • Promotional credit limit increases

Employment and Background Checks

  • Employment screening processes
  • Rental application reviews
  • Government security clearances
  • Professional license applications

Existing Creditor Reviews

  • Current lenders are reviewing your account
  • Credit limit reviews by existing providers
  • Account monitoring by banks and credit unions

Benefits of Soft Inquiries

Soft inquiries let you shop around and gather information without penalty. You can check multiple insurance quotes, review pre-approved offers, and monitor your credit health as often as needed. This freedom helps you make informed financial decisions without worrying about credit score damage.

Hard Credit Inquiries Explained

Hard inquiries require your written permission and occur when you actively apply for new credit. These enquiries give lenders full access to your credit report and can temporarily lower your credit score.

When Hard Inquiries Occur

Credit Applications

  • Personal loan applications
  • Car loan applications
  • Home loan applications

Service Applications Requiring Credit

  • Mobile phone plans with handset purchases
  • Utility connections in some cases
  • Rental applications in certain states
  • Business credit applications

Impact on Your Credit Score

Hard inquiries typically reduce your credit score by 5-10 points in Australia. The impact varies based on your credit history:

  • Strong history (750+): Minimal Impact, usually 5 points or less
  • Average history (600-749): Moderate Impact, 5-10 points
  • Poor history (below 600): Larger Impact, potentially 10+ points

The score reduction is temporary, with most of the impact fading within 3-6 months. Your score usually recovers fully within 12 months if you maintain good credit habits.

How Long Do Inquiries Stay on Your Credit Report?

Soft Inquiries

Soft inquiries don’t appear on the reports that lenders see. While credit reporting agencies may keep internal records, these aren’t shared with potential creditors and don’t influence lending decisions.

Hard Inquiries

Hard inquiries remain visible on your credit report for five years from the date they occurred. This extended timeline means lenders can see your recent credit-seeking behavior when evaluating new applications.

The five-year period applies regardless of whether you were approved or declined for the credit you sought. Even unsuccessful applications leave their mark on your credit file.

Impact on Your Credit Score Over Time

Understanding how inquiries impact changes over time helps you plan your applications strategically.

Immediate impact (0-30 days)

  • Hard inquiries cause immediate score reduction
  • Multiple inquiries compound the effect
  • Soft inquiries cause no change

Short-term impact (1-6 months)

  • Hard inquiry impact begins to fade
  • Score starts recovering with a good payment history
  • New positive credit behavior helps offset the impact

Long-term impact (6 months-5 years)

  • Score typically recovers to pre-inquiry levels within 12 months
  • Inquiry remains visible but carries less weight in scoring models
  • Older inquiries have minimal impact on new applications

When Each Type Occurs: Real-World Scenarios

Soft Inquiry Scenarios

Scenario 1: Checking Your Credit Score

Sarah wants to see her credit score before applying for a home loan. She logs into her bank’s app and checks her score monthly. Each check is a soft inquiry that won’t affect her rating.

Scenario 2: Pre-approved Credit Card Offer

Mark receives a pre-approved credit card offer in the mail. The bank used a soft inquiry to determine his eligibility without impacting his score. If he applies for the card, that triggers a hard inquiry.

Scenario 3: Insurance Quote

Lisa shops for car insurance online. Each insurer runs a soft inquiry to assess the risk profile and provide accurate quotes. She can compare multiple quotes without credit score consequences.

Hard Inquiry Scenarios

Scenario 1: Credit Card Application

David applies for a rewards credit card online. The bank runs a hard inquiry to review his full credit history before making an approval decision. His score drops 7 points temporarily.

Scenario 2: Home Loan Shopping

Emma applies with three different lenders for a home loan within two weeks. Because she’s shopping for the same type of credit within a short timeframe, the inquiries typically count as one for scoring purposes.

Scenario 3: Car Loan at Dealership

Tom finances a car purchase through the dealership. The finance company runs a hard inquiry to determine loan terms and approval. This appears as a separate inquiry on his credit report.

How to Check Your Credit Report Safely

Checking your own credit report is always a soft inquiry in Australia. You have the right to access your credit information without penalty.

Free Credit Report Options

Annual Free Reports

  • Each credit reporting body must provide one free report per year
  • Request directly from Equifax, Experian, or illion
  • Processing time is typically 10-14 business days

Online Credit Monitoring

  • Many services offer free monthly credit score updates
  • Apps and websites provide ongoing monitoring
  • Immediate access to score changes and report updates

Step-by-Step Guide: Obtaining Your Free Credit Report

  1. Choose your credit reporting body (Equifax, Experian, or illion)
  2. Visit their official website and locate the free credit report section
  3. Complete the application form with personal details
  4. Verify your identity through security questions or document upload
  5. Select delivery method (email, mail, or secure online portal)
  6. Review the report carefully when received
  7. Check for errors or unfamiliar inquiries
  8. Dispute any incorrect information through the appropriate channels

What to Look for in Your Credit Report

Inquiry Section Review

  • Check dates and types of all inquiries
  • Verify you recognize all hard inquiries listed
  • Look for any unauthorized credit checks
  • Note the mix of soft and hard inquiries

Error Identification

  • Inquiries you didn’t authorize
  • Incorrect dates or amounts
  • Inquiries from unknown lenders
  • Duplicate entries for the same application

The 14-Day Rule for Similar Credit Types

When shopping for the same type of credit (like home loans or car loans), multiple inquiries within 14 days typically count as one inquiry for scoring purposes. This rule recognizes that consumers shop around for the best rates.

What to Do If You Find Unauthorized Inquiries

Discovering unauthorized hard inquiries on your credit report requires immediate action to protect your credit health and identity.

Immediate Steps

  1. Document the unauthorized inquiry with screenshots or printed copies
  2. Contact the credit reporting body to dispute the inquiry
  3. Reach out to the lender who made the inquiry directly
  4. File a complaint with the relevant authorities if identity theft is suspected
  5. Monitor your credit closely for additional unauthorized activity

Dispute Process

The dispute process typically takes 30-45 days and may require supporting documentation. Keep records of all communications and follow up regularly until the issue is resolved.

Ready to improve your credit health? Check out our services or get a free quote to see how we can help you manage your credit inquiries and build a stronger financial future.

Frequently asked questions

1. What’s the difference between soft and hard credit inquiries?

Soft inquiries don’t affect your credit score and include checking your own report, pre-approval offers, and background checks. Hard inquiries require your permission, occur when applying for credit, and can lower your score by 5-10 points.

2. Does checking my own credit report hurt my credit score?

No, checking your own credit report is always a soft inquiry that won’t impact your score. You can check your credit report unlimited times without any negative consequences.

3. How long do hard inquiries stay on my credit report in Australia?

Hard inquiries remain visible on your credit report for five years from the date they occurred, regardless of whether your application was approved or declined.

4. How much do hard inquiries lower my credit score?

Hard inquiries typically reduce your credit score by 5-10 points in Australia. The impact is usually minimal (5 points or less) for those with a strong credit history above 750, but it can be higher for those with poor credit.

5. What happens if I apply for multiple loans within a short timeframe?

Multiple hard inquiries for the same type of credit (like home loans or car loans) within 14 days typically count as one inquiry for scoring purposes, allowing you to shop around for the best rates without excessive score damage.

 

Disclaimer: All information provided in this article is based on research and our professional views only. Credit repair and financial situations vary by individual circumstances. If you have specific questions about your credit report or need personalized advice, please reach out to us directly for professional guidance tailored to your situation.

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