What is the difference between hard and soft inquiries on your credit report?
credit reports, such as those generated by CIBIL, there are two types of inquiries: hard inquiries and soft inquiries. These inquiries have different purposes and implications for your credit report and score. For instance, Bangalore-based IT professional 32-year-old Ajay Sharma accessed his credit report in February in run up to his plan to apply for a car loan in March.
The inquiry that was conceived last month was soft, whereas the inquiry generated by the bank where he applied for loan is ‘hard’. Let us understand this in more detail. Hard Inquiries: Hard inquiries take place when a lender checks your credit report as part of the process of making a lending decision.
These inquiries usually happen when you apply for a loan or a credit card. These are recorded on your credit report and could have a temporary negative impact on your credit score. Each hard inquiry often results in a small fall in your score, usually a few points.
It is vital to remember that too many hard inquiries — within a short period — when accompanied by a high number of new accounts, may indicate to banks that you are actively seeking credit. This could indicate financial stress and increase perceived risk. ALSO READ: Can you get a mortgage with a low CIBIL score? These are 4 ways to get a house loan These inquiries remain on your credit report for a couple of years, but as one would expect their impact on credit score falls over a period of time.
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