Are you wondering what hard and soft inquiries for credit
are and how they affect your CIBIL score? These credit inquiries are used to
help lenders gauge your creditworthiness and leave an impact on your credit
history. If you regularly check your CIBIL score online, you may know whether these inquiries are helping or hurting
your credit.
Fortunately, understanding credit or CIBIL inquiries is not
as complicated as it seems. This article explains their types, the difference
between soft inquiries and hard inquiries, and their impact on your CIBIL score
in detail. Keep reading, and you will also get to know how to dispute hard
credit inquiries.
How Do Credit Inquiries Work?
Your credit history or profile is a summary of your debts
and repayments. A high CIBIL or credit score in your report indicates higher
creditworthiness. A credit inquiry is an inquiry into your credit history and
score by a lender or creditor. This can be done when you apply for a loan,
credit card, or another type of credit.
Some inquiries may appear on your credit report and impact
your credit score. Do you want to learn which ones? You will, in the following
sections.
What are the Types of Credit Inquiries?
Hard inquiries and soft inquiries are the two distinct types
of credit inquiries. Let's examine each type in more detail.
What is a Hard Inquiry?
A hard inquiry for credit is an inquiry into your credit
history by a lender or creditor when you apply for a loan, credit card, or
another type of credit. These inquiries will appear on your credit report for 2
years and can impact your credit score. When a lender makes a hard inquiry,
they may look at your CIBIL score, credit report, and any other information
they deem necessary.
What are Some Common Examples of Hard Inquiries?
Some of the most common examples of hard inquiries are:
¢ Application
for a loan or credit card
¢ Application
for a mortgage or auto loan
¢ Application
for an increase in credit limit
What is a Soft Inquiry?
A soft CIBIL inquiry is an inquiry into your credit history
by a lender or creditor that does not result from a credit application. These
inquiries do not appear on your credit report and do not affect your credit
score.
What are Some Common Examples of Soft Inquiries?
Some of the most common examples of soft inquiries include:
¢ The
pre-screened credit card offers
¢ Checking
your own credit report
¢ Employers
checking your credit report for a job
What are the Key Differences between Soft Inquiries & Hard Inquiries?
A hard inquiry is considered more serious than a soft
inquiry since it signals to lenders that you are actively seeking new credit.
This can result in a slight decrease in your credit score. This is why it's
important to only apply for loans or credit cards when necessary and when you
are confident you can be approved.
Soft CIBIL inquiries, on the other hand, do not affect your
credit score at all. This is because a lender looks at your credit history
without deciding on your loan or credit card application. Soft inquiries are
often made for marketing purposes, such as when a credit card company offers
you a pre-approved offer through personal finance software.
How to Dispute Hard Credit Inquiries?
If you find any incorrect or unauthorized hard inquiries on
your credit report, you should dispute them with the credit bureaus. Otherwise,
the inquiry will stay on your report for two years.
To do this, you can contact the credit bureaus directly or
use the dispute process offered by each bureau. You can also check your score
with different bureaus to see if it's a mistake. Once you have filed a dispute,
the credit bureau will investigate the inquiry and, if it is found to be
erroneous, will remove it from your credit report.
It's essential to check your CIBIL score online
periodically. Note that verifying your score is a soft inquiry and won't show
up on your report. But you may spot an unauthorized hard inquiry while checking
your CIBIL score or credit report.
Author Bio:
Shiv Nanda is a financial analyst who currently lives in
Bangalore (refusing to acknowledge the name change) and works with MoneyTap,
India's first app-based credit-line. Shiv is a true finance geek, and his
friends love that. They always rely on him for advice on their investment
choices, budgeting skills, personal financial matters and when they want to get
a loan. He has made it his life's mission to help and educate people on various
financial topics.
