Introduction

Consumers, buyers, and professional undertakings are equally dependent on credit at the current time. The entire system of availability of credit and the duration of acceptance of a proposal depend on your credit score. An excellent credit score should have credit for the availability of debt and the purchase of some exclusive items. Important: Your credit score is a numerical representation of your credibility. It ranges from 300 to 900, which contains a high score (750 or more) that refers to a more credible person.

However, the importance of credit scores is not limited only to those who want credit. It can also help you get more attractive insurance options and even offer a more responsible image of you in the eyes of potential employers. A tough inquiry occurs when a lender or financial institution reviews your credit report to assess your credibility. 

Whenever you apply for a new credit card or loan, the concerned lender will request your credit report from the credit bureau, like TransUnion or CIBIL. This request leaves a mark on your credit history, which is known as a hard inquiry. Today, we will take a dip under the influence of hard inquiry on your credit score so you can make informed decisions to build and preserve your financial reputation.

In this article, we will find out what the difficult inquiry is. How they affect your credit score, and ways to reduce their effects. Let us start! Ii. What is a credit inquiry? A credit investigation occurs when a bank, lender, or other authorized party requests your credit report from the Credit Bureau. This is usually done to assess your credibility before approving a loan or credit card. You can also inquire yourself to check your credit status. 

There are two main types of credit inquiry: hard inquiries and soft inquiries, each affecting your credit score differently.

How a credit check works

A credit check occurs when someone reviews your credit history, including payment behavior and current debt levels. You can check your credit (a self-fag) or review it when you apply for a loan or credit card. 

There are two types of credit inquiries: 

• Hard Enquiry
• Soft Enquiry

A hard inquiry occurs when a lender assesses your credit for a loan or credit card application. These can temporarily reduce your credit score. On the other hand, soft inquiries occur when you examine your score or when companies check your credit for pre-approved offers. 

These do not affect your credit score. Both types appear on your credit report, but only a hard inquiry affects your CIBIL or credit score. Understanding the difference helps you manage your credit health more effectively.

How much does a Hard enquiry affect your CIBIL score?

A hard inquiry hurts your credit score,, and it can vary depending on your overall credit history. If you have a strong credit history, a single hard inquiry can only reduce a minor amount. However, if your credit history is less favorable, a difficult inquiry may have a more significant negative effect. On average, a hard inquiry can reduce your score by 3 to 5 points

How many Hard inquiries are too many?

There is no definite number of hard inquiries that is “too much”, but in a short time, many inquiries can affect your credit score, especially for credit cards. When model scoring, such as FICO, treats several inquiries within 14 days when auto, home, or student loan rates are for debt. However, this does not apply to credit cards or individual loans. To reduce the impact, apply for these loans within a small window, use pre-approval options when available, and focus on key factors like timely payments and low credit utilization. Occasional inquiries won’t hurt much, but applying for many cards at once is best avoided.

Do loan inquiries affect your CIBIL score?

The answer is yes, especially if they’re hard inquiries. Generally, if you have just one hard inquiry, you might see your score dip a bit. However, if you make several inquiries in a short time, it could raise red flags for lenders who might think you’re desperate for credit.

Here are a few things to keep in mind:

• A bump down in your score: When you have multiple inquiries close together, your CIBIL score can drop slightly.
• Timing is important: If you’re shopping around for a specific type of loan, like a mortgage or car loan, credit bureaus often treat multiple inquiries within 14 to 45 days as if they’re just one inquiry. This makes it easier for you without severely impacting your score.
• Temporary effects: Don’t worry too much, hard inquiries don’t last forever. Over time, especially if you keep up good credit habits, their impact will fade.

Now, if you need to check your CIBIL score without affecting it, you have some good options:

• CIBIL’s official website allows you to get one free credit report a year.
• Many banks, such as HDFC and ICICI, provide free CIBIL score checks through their online banking.
• Fintech websites like Paisabazaar and BankBazaar let you check your score using just your PAN and a few basic details.

These methods all involve soft inquiries, which won’t harm your credit score at all.

To manage and limit hard inquiries on your credit report, consider these steps:

1. Shop smart: Before applying for loans or credit cards, use pre-qualification tools to see your chances without triggering hard inquiries.

2. Avoid applying too quickly: Be careful about submitting multiple applications back-to-back; this could raise concerns about your creditworthiness.

3. Regularly check your credit report: Keep an eye on your report and contest any errors with the credit bureaus to ensure your credit history remains accurate.

Conclusion

Not every credit inquiry will hurt you, but it’s wise to keep an eye on hard inquiries. If you have several in a short time, they can lower your credit score a bit. I recommend checking your credit score regularly with soft inquiry tools, which don’t affect your score. Being aware of your credit can help you borrow wisely and secure better loan terms.