Everything You Need to Know About Hard Credit Inquiry

Availing credit helps gain financial flexibility while ensuring financial stability in times of uncertainty or financial challenges. However, the application of too many credit facilities at the same time can lead to hard credit inquiry. This could also impact your credit score negatively. Read on to know more about hard inquiry and the effective strategies that will help you overcome its impact.

What is Hard Inquiry?

When you apply for a new credit, a hard inquiry is done to check your entire credit history. A hard inquiry is performed by potential lender to assess the level of risk associated with extending the credit facility to you.

An excessive number of hard inquiries can impact your credit score negatively, harming your overall financial well-being. It can make it challenging for you to avail better loan offers. However, a single hard inquiry has minimal effect on your credit score.

For instance, when you apply for a new credit card, a Personal Loan, a mortgage loan or ask for an increase in credit limit, your lender will check your credit history. This generates a hard credit inquiry.

How Does a Hard Inquiry Impact Your Credit Score?

Hard inquiries can cause small and temporary damage to your credit score. The impact is usually minimal, and it only affects your score for about a year.

However, multiple hard inquiries within a short period can be seen by lenders as a sign that you are in financial trouble and seeking more credit. This behaviour may hurt your chances of getting approved for a loan in the future, or you may end up qualifying for a loan with stringent terms.

How to Dispute Hard Credit Inquiries?

You can dispute hard credit inquiries by following these strategies:

1. Check Your Credit Report

Obtain your credit report from each of the major credit bureaus and check for the any mentioned hard inquiries in your report.

2. Identify the Inquiries

Go through your credit report thoroughly to identify the accuracy of the hard inquiries and choose the one that you wish to dispute.

3. Gather Evidence

Gather any supporting documentation, such as letters or emails, to prove that you did not authorise the inquiry or that it was made in error.

4. Draft a Dispute Letter

Write a formal dispute letter to the credit bureau explaining why you are reporting the inquiry. Include your name, address, account number, and a clear explanation of why you think the inquiry was fraudulent or made by mistake.

5. Provide Pieces of Evidence

Attach copies of any supporting documentation to strengthen your claim and then send the dispute letter through an official mail ID.

6. Be Patient and Wait for a Response

The credit information bureau will investigate your dispute and notify you of the results within 30 days. If the credit bureau finds the inquiry to be inaccurate or unauthorised, it will be removed from your credit report.

How to Minimise the Effect of Hard Credit Inquiries?

You can minimise the impact of hard inquiries on your credit score by:

• Avoiding Applying for Multiple Credits

Applying for multiple credits generates hard inquiries. That is because it demonstrates over-reliance on debts and makes you a risky applicant to extend credit to. To avoid this situation, you must limit the number of credit applications. Remember to avoid applying for new credit within a short timeframe.

• Monitor Your Credit Report Regularly

Checking your credit report at regular intervals can help to identify any unauthorised or mistakenly added inquiries. This will help you report the error immediately to the credit bureau and give you peace of mind regarding the removal of the mistake from your report.

• Apply for Credit at the Time of Need

Before applying for a new credit, analyse your financial health properly. It will help you to understand if you truly need a new loan or credit card, avoiding the chances of borrowing a credit line unnecessarily. Moreover, before applying for any credit facility, it is always better to research the different loan terms offered by various lenders to choose the best option.

• Diversify Your Credit Mix

Try to maintain a healthy mix of credit by availing of secured and unsecured loans and revolving credit. This diversified credit mix helps to showcase your ability to manage different types of credit facilities, enhancing your credit score, and helping you qualify for better loan offers. Moreover, it will also help in minimising the impact of hard credit inquiries on your CIBIL score.

Checking your CIBIL score often helps you to have a better understanding of your creditworthiness, helping you qualify for loan approvals.

Also Read - How CIBIL Score is Calculated | A Step-by-Step Guide

How to Check CIBIL Score Online with Poonawalla Fincorp?

With Poonawalla Fincorp, you can check your CIBIL score for free and from the comfort of your home. Check out the three simple steps below to check your credit score in 2 minutes:

• Step 1: Click on the option of “Check Your CIBIL Score”.
• Step 2: Enter necessary KYC information such as your name, PAN number, employment type, residential details and contact information.
• Step 3: Cross-check the provided information to avoid any errors and click on “Submit”.

Also Read - How to Improve CIBIL Score to Get a Loan at Lower Interest Rates?

To Conclude

Hard credit inquiries on your credit report can cause temporary damage to your credit report. To minimise the impact of hard inquiries on your credit score, you should limit new credit applications, diversify your credit mix, monitor your credit report thoroughly and research different loan terms. Moreover, checking your CIBIL score from time to time will help you better understand your eligibility for loans, helping you identify and report unauthorised inquiries.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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