Your credit score influences a lot of financial decisions throughout your life. Applying for different types of loans, getting credit cards, or any other form of credit is easier when you have a good credit score. This is because lenders see your score as a reflection of your financial management habits. And since a higher score indicates better financial management, lenders are more willing to provide you with competitive services.
Now, many factors can impact your CIBIL score. The most common ones are non-repayment of debts, a high debt-to-income (DTI) ratio, a poor credit history, etc. But did you know enquiries, both hard and soft, can also affect your credit score? Yes, they can! Here’s how.
All you need to know about enquiries
A credit inquiry is basically a check of your creditworthiness. Both people and companies can request to check your credit report through a legally permitted application. Too many enquiries, however, can have direct consequences on your credit report.
Types of inquiries
- Soft inquiries
Soft inquiries occur when an individual or an agency checks your credit report only to pre-approve you for their existing products. In fact, your monthly request to check your credit history for any inaccuracies also comes under soft inquiries. The main upside of soft inquiries is that they don’t show up in your credit history. This is also a convenient way to run a CIBIL score check every once in a while.
- Hard inquiries
A hard inquiry is an application request for loans or credit cards, etc., that requires lenders or any other authority to check your credit history. Sometimes, processes like setting up utilities, applying for insurance, requesting a credit line increase, also require them. All these inquiry instances are recorded in your credit report.
Now, a few hard inquiries in your credit report are not a cause of concern. However, you want to avoid multiple hard inquiries on your credit history. This is because a large number of inquiries in a short duration reflect poor financial management and often lead to a drop in your CIBIL score. Besides, a decent credit score is non-negotiable for many types of credit. Hence, making multiple inquiries can lower your chances to obtain them.
Now, we know a large number of hard inquiries in a short period can negatively impact your credit score. To make sure your score remains healthy, perform CIBIL score checks regularly.
How to remove a hard EMI entry from your credit report?
Hard inquiries are usually visible on your credit history for two years before they fall off naturally. Unfortunately, there is no other way to remove one from your report. Keep in mind that sometimes hard inquiries may be erroneously added to your report. In such a case, you can dispute them easily.
Only multiple credit inquiries over a short time have the power to lower your credit score significantly. It is a good practice to check your credit history regularly so that you can identify any anomalies quickly. You can also run a CIBIL score check free of cost across various apps and websites to keep track of your credit profile.