CIBIL Inquiries: Impact of Soft Inquiry vs Hard Inquiry

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CIBIL Inquiries: Impact of Soft Inquiry vs Hard Inquiry

If you are applying for any loans or credit, your lender will ask credit bureaus to provide them with your credit report. These inquiries come in two forms – soft inquiry and hard inquiry. Today, we will discuss the difference between these inquiries and how they work.

How Do Credit Inquiries Work?

To decide whether to extend your credit – if yes, then how much and at what interest rate – lenders check your credit report from one or more of the four major national consumer credit bureaus. Your credit report offers a summary of your payment history and debts.

When you apply for credit, it indicates that you are giving the lenders permission to do a credit check, and when they conduct a credit check, hard inquiries appear on your credit report.

Certain companies and employers can access your credit information with your written permission. You can also check your credit report and scores. Such credit checks create a soft inquiry on your credit report.

Types of Inquiries: Soft Inquiry vs Hard Inquiry

The primary difference between the two is whether or not you gave the lender permission to check your credit report. If you let the lender scrutinise your report, it is called a hard inquiry, but it is a soft inquiry if the lender or bank rummages through your credit report without your knowledge.

What Is a Hard Inquiry?

A hard inquiry is usually taking place when you have applied for something. People dread it since it shows up on your credit report, lowering your credit score. Following are some examples of hard inquiries:

  • Any loan application
  • Application for a new utility
  • Request for a credit limit increase
  • Apartment rental applications
  • Application for lines of credit

What Is a Soft Inquiry?

A soft inquiry is harmless as it leaves no impact on your credit score. A lender won’t be able to see soft inquiries on your credit report unless the consumer discloses them. Following are some soft inquiry examples:

  • Employment applications
  • Personal credit checks
  • Pre-approved credit offers
  • Applications for insurance
  • Account reviews by creditors

How Hard Inquiries Impact Your Credit Scores?

The biggest problem with hard inquiries is that they influence a lender’s decision. Too many hard inquiries in a short period indicate a credit-hungry nature with a high-risk quotient. A high-risk profile is preferred to be rejected, damaging your CIBIL score or accepted at a high rate of interest.

Depending on an individual’s credit record, the impact of hard inquiries can vary. If you have a credit score above 750, you should not land any problems getting loan approvals from lenders. However, if you have a lower score or repayment issues in the past, and you move ahead to apply for more loans without resolving them, lenders will perform a hard inquiry, resulting in rejection and a decrease in your credit score.

So to save yourself from rejection and hard inquiries that will affect your credit score, start paying your loans and credit card bills on time. Be patient and apply for a loan only when you have a good credit score.

How Soft Inquiries Impact Your Credit Scores?

Since soft inquiries are not connected with an application for new credit or anything like that, they do not negatively impact your credit score. An individual or a lender can perform a soft inquiry as often as needed without changing your credit score.

When and How to Dispute Hard Inquiries on Your Credit Report?

There are times when you may not recognise a few hard inquiries that reflect on your credit report. They might be errors, and since hard inquiries stay on your credit report for at least two years, you have the right to dispute such errors.

Consider the following steps to dispute hard inquiries:

  • Contact the credit bureau to let them know of this error and send documents to support your dispute.
  • Let your potential lender know about your filed dispute and send them the documents supporting your dispute.
  • The credit bureau takes 30 to 45 days to investigate and send a response to your dispute.

Conclusion

To sum it up, soft inquiries do not impact your credit score, and because of this, you can check it for free on Fit.Credit.

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