How an enquiry impacts your CIBIL Score?

29-Oct-2016 written by : FSI-Team

Shobha wanted a personal loan to pay for her upcoming marriage ceremony. As a responsible credit user she decided to first contact multiple banks to compare home loan options. After going through their terms and conditions she applied for the loan in three of these banks, which she felt were giving better deals than others. However, little did she know that her actions were far from wise. What she did was triggering multiple enquiries on her CIBIL report, as a result of her multiple loan applications. Thus, her loan application was rejected by all the banks, as they noticed the enquiries and considered it a "credit hungry behaviour".

Can an Enquiry Impact your CIBIL score?

An enquiry may or may not have an effect on your CIBIL. It depends on whether the enquiry is a soft enquiry, or a hard enquiry.

Soft Enquiry: When you obtain your CIBIL report from the agency, to monitor your score, or to check for discrepancies, then it is viewed as a soft enquiry. The same goes for when your lender or bank does a periodic review of their existing accounts. In either of these cases your CIBIL score is not impacted. Plus, you can make as many soft enquiries as you want without worrying about your score.

Hard Enquiry: When you apply for a loan or a credit card, then the lender invariably performs a credit check. They contact CIBIL and seek your credit report for evaluation. This kind of enquiry is viewed as a hard enquiry, and it bears significance, for it impacts your credit score. In fact, the amount of damage that your score takes is directly proportional to the total no. of enquiries made in a short period of time. If you want to make a good impression on your future lender then you would not want to look at multiple hard enquires on your report.

Here are some of the ways how hard enquiries can affect your CIBIL score:

  • Credit History: Hard enquiries affect credit reports differently. Thus, one individual may notice less damage on the CIBIL score in comparison to another person, for the same no. of enquiries. If you have a good credit history then the damage will be less, and vice versa.
  • Typical Loss: Typically, a single hard enquiry while may not lower your score. The damage could be done if there have been a lot of hard enquiries simultaneously.
  • Marred Credit Report: Credit enquiries on your credit report are akin to remarks in red ink made by a teacher on a student's report card. You do not want to have them on your report. This is because even if your score is high, the lenders will not feel comfortable with your profile if they see multiple enquiries on the report, for they will considered a reckless credit behaviour that shows hunger for credit.
  • Identity Theft: Sometimes multiple inquiries can also be a result of an instance of identity theft. You may be a victim without your even knowing it.
  • How to Prevent Enquiries From Damaging your Credit Report?

    By avoiding hard enquiries on your credit report you can save your score from falling. Here are some tips on preventing your score from enquiries:

  • Limiting Hard Enquiries: Before you apply for any loan make sure you check your score first. If needed, improve credit score, and only then contact a bank. This will ensure that your application is approved with minimum no. of enquiries.
  • Identity Thefts: If you notice enquiries on your report which have not been made by you, then contact the respective bank or NFBC immediately. Identity thefts are becoming more and more common, and if you end up becoming a victim of the same, then the sooner you act the lesser will be the damage.

All the enquiries that have been made on your report remain there forever. However, you need not to panic, for most financial institutions only consider the enquiries made during the last two years. Just try to keep your CIBIL score high before you apply for loans or credit cards, and you will be fine. You can also take help from a professional credit consulting company such as CreditSudhaar, if need be.



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