10-Oct-2018 written by : FSI-Team
With greater awareness and understanding kicking in upon the credit bureau and credit profile, the habitants of metro cities must have heard the term inquiry. Further some may even have heard the two variants called hard inquiry and soft inquiry. Multiple questions like what are these inquiries, what is their importance, what role do these play in one’s credit profile keep coming up. Read on to address all the queries on these inquiries.
The credit bureau is custodian of all credit related data pertaining to all individual borrowers. The lending institutions and banks wish to know the past performance of the prospective borrower before sanctioning the loan. They send a request to the credit bureau to have access to this data. The request to access this data received by the bureau is termed as an inquiry. Every time a bank or a lending institution passes such request the same gets captured in the data base of the bureau and also starts to reflect in the bureau report.
A hard inquiry, also known as a hard pull, happens when a lending institution checks the credit profile of an individual. Whenever one applies for a home loan, personal loan, credit card or any other credit product the bank will run a bureau check and that reflects as a hard inquiry.
The banks will ping the bureau for data only when the borrower has applied for a credit facility. Howerver, the individual himself can also obtain the bureau report. The data of this report access also gets captured in bureau data but does not form part of the credit report. The inquiry of personal report by an individual is termed as a soft inquiry.
Yes, there is big difference in the data that gets populated on reports pulled through a hard and a soft inquiry. While there would be no difference in the credit score, the data of trade lines (credit product accounts) will be masked on certain points. The report obtained by the individual for himself will carry complete details on every account but the report obtained through a hard inquiry would not provide details like the bank name, loan account number to the other lending institution under the rule mandated by the Reserve Bank of India.
The hard inquiries do have an impact on the credit score. They impact in lowering the score for a short time. While this may not be of a big concern but multiple hard inquiries in a short span will definitely result in a low CIBIL score. It means that one has to be careful while seeking loan and must not apply with various lenders within a short time frame. In the event of a loan getting rejected, one must try to understand the reason for rejection and work on improving it rather continued application with other lenders.
The soft inquiry does not have any impact on the credit profile. Since the data pertain to you and is not being inquired by a lender, it can be accessed any number of times without the fear of having the inquiries affecting the score. If so desired, one can obtain his or her report every single day of the year without any hitch.
Just like the trade lines that continue to reflect on the bureau report and do not have an expiry date, even the hard inquiries reflect on the bureau report and do not get purged over a period of time.
The inquiries on your report matter a lot. Multiple inquiries will only lead to suspicion in an underwriter’s mind and will lead to continued rejection if the borrower persists with efforts to gain a loan. It will also lead to a lower credit score.