Why is it important for a mortgage agent to understand the difference between 'hard' and 'soft' inquiries on a client's credit report?

Question: Why is it important for a mortgage agent to understand the difference between 'hard' and 'soft' inquiries on a client's credit report?

Answer options:

• Soft inquiries indicate the client has applied for too much credit. ✅ Hard inquiries can negatively impact a client's credit score, while soft inquiries generally do not.
• Only soft inquiries are visible to lenders who pull the client's report.
• Hard inquiries are removed from the report immediately after a credit decision is made.

Correct answer: Hard inquiries can negatively impact a client's credit score, while soft inquiries generally do not.

Explanation: Hard inquiries, often made by lenders when a client applies for new credit, can slightly lower a credit score because they suggest the client is seeking new debt. Soft inquiries, like when someone checks their own credit, have no impact on the score and are generally not visible to potential lenders.