How do hard inquiries differ from soft inquiries in relation to a credit report?

Hard inquiries affect credit score, while soft inquiries do not. A hard inquiry occurs when a lender checks your credit report as part of their decision-making process for a loan, credit card, or mortgage application. This type of inquiry indicates that you are seeking new credit and can lead to a slight decrease in your credit score, particularly if you have several hard inquiries within a short period.

On the other hand, soft inquiries occur when you or someone else checks your credit report for non-lending purposes, such as checking your own credit score, an employer background check, or pre-approved credit offers. These do not have any impact on your credit score. Thus, the distinction is essential for understanding how credit checks can influence your creditworthiness when applying for new credit.