Loan Enquiry: Cibil Score Impact And Solutions

When applying for a loan or credit card, lenders will conduct a credit check to assess your credit eligibility. This is known as a hard inquiry and will be reflected on your CIBIL credit report for at least a year, lowering your credit score. A hard inquiry occurs when a lender or financial institution reviews your credit report to determine your creditworthiness. While a single hard inquiry may have a minor impact on your credit score, multiple inquiries within a short span can be perceived as a risk by lenders, potentially leading to a more significant dip in your score. It is important to distinguish hard inquiries from soft inquiries, which do not affect your credit score. Soft inquiries are generated when you check your own credit score or when lenders ask for a broad overview of your credit report to shortlist potential customers for loan products.

Hard vs. soft inquiries

A CIBIL credit report is a record of an individual's credit history, including the number of accounts, the lender's name, the loan amount, and the history of payments. Lenders perform a credit check to assess an individual's credit eligibility, and a hard credit inquiry may stay on the report for up to 2 years.

A hard inquiry occurs when a lender or financial institution reviews an individual's credit report to assess their creditworthiness. This usually happens when an individual applies for a loan or credit card. A hard inquiry can lead to a slight dip in the credit score. Multiple hard inquiries within a short span can be a cause for concern for lenders, as it may indicate that the individual is actively seeking credit and is thus a financial risk.

A soft inquiry, on the other hand, occurs when an individual checks their own credit score or when lenders ask for a broad overview of an individual's credit report to shortlist potential customers for credit card or loan offers. Soft inquiries do not impact the credit score and are not visible to lenders.

It is important to keep track of the number of hard inquiries, as they can negatively impact the credit score. Soft inquiries, however, can be made freely without affecting the credit score or creditworthiness.

How to remove a hard inquiry

A hard inquiry is when a lender or financial institution reviews your credit report to assess your creditworthiness. This occurs when you apply for a new credit card or loan. This request leaves a mark on your credit history, known as a hard inquiry, and can cause a small dip in your credit score. Multiple hard inquiries within a short span can be perceived as a risk by lenders and may lead to a more significant decrease in your credit score.

Hard inquiries can stay on your CIBIL credit report for up to 2 years and impact your credit score for at least 1 year. To improve your credit score during this period, ensure you make timely repayments on your credit card bills and loans, and keep your credit card balances low.

You cannot remove legitimate hard inquiries from your CIBIL report. However, if you spot an unauthorized or fraudulent hard inquiry, you can dispute it and have it removed. Here's how you can do it:

• Obtain your CIBIL report: Review your CIBIL credit report regularly to ensure that all inquiries are valid. Identify any suspicious or unauthorized hard inquiries.
• Contact the lender: If you find an unauthorized hard inquiry, verify the inquiry with the lender and request a No Objection Certificate (NOC) if it was an error.
• Raise a dispute: Visit the official CIBIL website and go to the "Dispute Resolution" or "Consumer Dispute Resolution" section. Fill out the online dispute form, providing the necessary details, and attach the NOC if applicable. You may also need to provide identity and address proof.
• Wait for the resolution: The dispute resolution process can take up to 30 to 90 days, as the credit bureau will need to contact the lender to verify the inquiry.

It is important to note that disputing an unauthorized hard inquiry does not guarantee its removal, and the ultimate decision rests with the credit bureau. Additionally, it may take time for your credit score to recover from the impact of the hard inquiry, even after its removal.

How to improve your credit score

A CIBIL credit score is a numerical representation of an individual's creditworthiness. It is calculated based on an individual's entire credit history, including the number of accounts, the lender's name, the loan amount, and the history of payments. A good CIBIL score is crucial when trying to procure a loan as it proves to the lender that you are a responsible borrower. A score above 700 is generally considered good enough for most credit products.

• Make timely repayments of dues: Delinquent payments are a major detriment to one's credit score. It is important to make all payments on time, including credit card bills and loan EMIs.
• Maintain a healthy credit utilisation ratio: It is recommended to keep your credit utilisation below 30% of your available credit limit. This signals responsible credit management to lenders.
• Monitor credit activity for errors: Regularly review your credit card statements and credit reports to identify any errors or unauthorised transactions that may harm your credit score. Prompt action on any discrepancies is vital.
• Clear outstanding debts: Having outstanding debt negatively impacts your CIBIL score. It is essential to repay your debt within your chosen timeline or make prepayments to foreclose your loan.
• Use credit responsibly: Avoid signing up for multiple credit cards or loans impulsively. Be selective and apply for credit only when you genuinely need it.
• Maintain a diverse mix of credit accounts: Consistently make payments on time, keep your credit balances low, and maintain a variety of credit accounts.

While a single loan inquiry may cause a small dip in your CIBIL score, it is important to focus on long-term credit health. Positive credit history will outweigh the inquiry's impact and gradually raise your CIBIL score over time.

How to check for unauthorized inquiries

It is important to check your credit score regularly to ensure that your credit score is an accurate representation of your creditworthiness. A single hard inquiry can cause a small dip in your CIBIL score, but multiple inquiries can have a significant impact. Therefore, it is crucial to monitor your credit report for any suspicious activity.

• Obtain a copy of your credit report from CIBIL: You can do this by visiting the official CIBIL website and creating an account. Log in to your account to access your dashboard, where you will be able to view your credit report.
• Review your credit report: Go through all the inquiries carefully and identify any unfamiliar or unauthorized entries. Look for inquiries that you did not initiate or authorize. These could be potential errors or even fraud attempts.
• Contact the credit bureau: If you spot any unauthorized inquiries, intimate the credit bureau about the occurrence and provide them with relevant details. You can reach out to CIBIL's customer support or use their dispute resolution process.
• Dispute the unauthorized inquiry: You can dispute the unauthorized inquiry by filing a formal dispute with the credit bureau. This can often be done through their website. Provide any supporting documentation or evidence to strengthen your claim.
• Follow up: Ensure that you follow up with the credit bureau to confirm that the unauthorized inquiries have been removed from your credit report. Keep records of all communications and documentation related to the dispute process.

Remember, you can only dispute and remove unauthorized or erroneous inquiries from your credit report. If you have applied for a loan or credit card, the resulting hard inquiries cannot be removed, even by the lender or bank. These genuine inquiries will remain on your report for at least a year and affect your credit score during that time.

How long do hard inquiries stay on your report?

A hard inquiry, also known as a "hard pull" or "hard credit check", occurs when a lender or financial institution reviews your credit report to assess your creditworthiness. Typically, a single hard inquiry has a minor and temporary effect on your credit score, lowering it by a few points, generally less than five. The impact usually lasts less than a year, although the inquiry remains on your credit report for up to two years.

For those with a long credit history and high scores, a single hard inquiry may have little to no impact. However, multiple hard inquiries in a short period can have a more significant effect. This could signal to lenders that you are a higher-risk customer, potentially leading to loan denials or less favorable terms.

To improve your credit score within this period, ensure you make timely repayments on your credit card bills and keep your credit utilization ratio below 30%.

If a hard inquiry is reported in error or is the result of identity theft or fraud, you may be able to get it removed from your credit reports.

Frequently asked questions