What defines a "hard inquiry" on a credit report?

A "hard inquiry" on a credit report is defined specifically as a situation when a lender checks a consumer's credit to make a lending decision. This typically occurs when an individual applies for a loan or a credit card, and the lender wants to assess the creditworthiness of the borrower.

Hard inquiries can impact a consumer's credit score, as they indicate that the consumer is seeking new credit. Multiple hard inquiries in a short period can signal to credit scoring models that the consumer may be taking on too much debt, potentially lowering their credit score. This is crucial for consumers to understand, particularly when considering taking on new credit, as it can influence their future borrowing ability.

In contrast, when a consumer checks their own credit report, it is classified as a "soft inquiry," which does not affect their credit score. Similarly, updates made by credit reporting agencies or credit checks performed for employment purposes do not fall under the category of hard inquiries that influence the lending process. Understanding these distinctions helps consumers better manage their credit and be informed about actions that might affect their credit scores.