What does the term "hard inquiry" refer to regarding credit?

The term "hard inquiry" specifically refers to a check on a borrower's credit report that can result in a slight decrease in their credit score. Hard inquiries generally occur when a lender or financial institution assesses a borrower's creditworthiness as part of the application process for credit, such as a mortgage, car loan, or credit card.

When multiple hard inquiries are made within a short time frame for the same type of credit, they typically have a minimal impact on the credit score. However, lenders interpret repeated hard inquiries as a sign that the borrower may be in financial distress, which is why it can lower the score. Understanding the implications of hard inquiries is crucial for borrowers, as they need to be mindful of how applying for new credit can affect their overall credit profile.

Other options do not accurately represent the concept of a hard inquiry. A soft inquiry, for instance, does not affect credit scores, while a review of financial statements pertains to evaluations of income rather than credit history. Automatic credit assessments by online platforms typically do not include hard inquiries either. Thus, only the option that defines a hard inquiry as a credit check that can slightly lower one’s credit score is the accurate description.