Your credit score and credit report are a measure of your financial health. Among the many things that impact your credit score are the number of hard inquiries on your credit report. Every time you apply for a fresh line of credit such as a loan or a credit card, it is registered as a hard inquiry in your report and remains in your report up to 24 months.
Although it is a relatively small factor impacting your credit score (10%), too many hard inquiries made in quick succession can make you seem "credit hungry". This especially matters if you are applying for a fresh line of credit and you already have a low CIBIL score. At a time like this what to do you if you find out that your credit report has been pulled out without your knowledge or approval? Should you dispute it right away or probe further? Here are some answers:
Before you take any rash decision and file an invalid dispute with CIBIL, find out the kind of inquiry that has been made. An inquiry is only considered a hard inquiry if it is regarding a fresh line of credit. A soft inquiry on the other hand may be made by a prospective employer. The other type of soft inquiry is when you are "prescreened" as part of a promotional offer by a lender. Such inquiries do not hurt your credit score as well and are marked as promotional in your credit report. The kind of inquiries mentioned above are thus legitimate even if you do not recognise them and do not result in a low CIBIL score.
A hard inquiry will however be made on behalf of a retail store if you apply for a store linked credit card, that you may later forget about. Therefore be careful before you fill out any forms for a credit card application the next time you visit to favourite shopping destination. A store card may seem lucrative but it works like any other regular credit card. More often than not a store card does not make sense as your regular credit card comes with as many rewards.
If you are sure that the kind of inquiry you have identified in your credit report does not fall under the above mentioned categories, the nest step to take is to identify the company that has made the inquiry for your credit report. Sometimes you may not recognise the name, but it may turn out to be a lending arm of a company that you may have done business with earlier. In any case, communicate with the concerned lender through email. The advantage of written communication is that is serves as a record in case you do need to file a CIBIL dispute.
Once you have established contact with the concerned lender ask for proof of your permission to access your credit records. Whether it is written or verbal authorisation the company concerned must make available the records that prove the fact that you are indeed interested in a fresh line of credit, to validate which they have made the inquiry.
If the concerned creditor provides proof that you do not recognise or simply does not respond to you within 30 days, raise a dispute with CIBIL. Make sure you attach the copy of your communication with the creditor to serve as proof of the fact that you had made a genuine effort to contact them. You may then request CIBIL to remove the said inquiry from your CIBIL report as it brings down your CIBIL score even if it is by a tad. If your report has been obtained illegally, it may even lead to identity theft, so raise an alarm immediately if you think a fraudulent creditor or impostor has laid your hands on your CIBIL report. In such cases, request CIBIL to understand the urgency of your dispute and take necessary action.
As it may be evident by now, such anomalies in your CIBIL report come to light if you are in the habit of checking your CIBIL report periodically. It is prudent to check your CIBIL score at least twice annually. You can utilise the facility of screening your financial health by accessing one free CIBIL report in a year to ensure that no errors and discrepancies have entered your CIBIL report.