As the awareness on credit score grows, people, in general, are getting to know the critically important factors that impact one’s credit profile. Paying the installments in time, ensuring that the credit cards are not maxed out and at least the minimum amount due is paid on or before the due date are now commonly known facts that influence one’s ability to have continued access to loans. Given the fact that this three digit numeric figure is an outcome of a much complex algorithm, there are finer elements that can sway this number in an adverse direction. One of such elements is inquiries.
This can simply be defined as one’s need for new credit. Each time one applies for any form of credit the lending institution checks the bureau data. This gets captured as one inquiry on the credit report. The date of inquiry along with the product and amount applied for, gets reported.
The question is that : does one need to worry about the inquiries? The answer is both yes and no. Let us get to understand this a little better.
The two reasons why one should be concerned about these are first, they can impact the bureau score adversely and second, one being susceptible to identity theft.
If you are shopping around for rate and there are multiple inquiries in a short span, it can potentially bring down your score. Multiple inquiries in a short span are conceived as the desperation of credit. Akin to any situation in life where desperation will only lead to stress, the credit profile also gets impacted similarly. Apart from the number of inquiries the product that one is applying for also has an impact. If one is running multiple inquiries on a home loan it may not impact as severely as would multiple inquiries on an unsecured product like personal loan would.
In a case where the person would have a shorter credit history or has a few accounts, a high number of inquiries can be even more impactful.
The second reason where one should be worried is on account of being a victim of identity theft. Cybercrime and impersonation of an individual to have financial gains is not a rare offence. Every individual is exposed to this new age crime. Now if one has not even applied for a loan and an inquiry is hitting the bureau, it is a serious cause of concern. If the transaction was to go through and the disbursal happens, it can jeopardize the borrowing capacity of an individual grossly, apart from having him to run from post to pillar to have this issue sorted out. Such events will result in a low CIBIL score.
There are two kinds of inquiries. Hard inquiry and soft inquiry. Any inquiry run by a lending institution or bank will get termed as a hard inquiry. When one obtains his own report, the same gets marked as a soft inquiry. While the hard inquiry impacts the score and multiple of these do influence the underwriters’ decision even if they do not have an adverse impact on the score, a soft inquiry has no bearing on the scores. One can obtain the report for himself any number of times without any fear. So if you are one who likes to keep a close watch and wish to obtain your credit report frequently, go ahead and do it without any doubt of impact.
The number of inquiries and product applied for topped up with one’s credit history and span in which the loans have been applied for will impact the credit profile. So do watch out for these.