A credit score check is an assessment of an individual’s creditworthiness based on their credit report and credit score. Lenders and creditors use credit score checks to determine whether to approve an application for credit or loans, and what terms and interest rates to offer. A higher credit score generally indicates that an individual has a good credit history and is more likely to be approved for credit with favourable terms.
There are two types of credit score checks or inquiries: a hard inquiry, which can affect a person’s credit score, and a soft inquiry, which does not impact their credit score. Let’s delve deeper:
What Is Hard Credit Score Check?
A hard credit score check, also known as a hard inquiry or hard pull, is a type of credit inquiry where a lender or creditor requests to view an individual’s full credit report and credit score. This type of inquiry typically occurs when an individual applies for credit, such as a credit card, loan, or mortgage. Hard inquiries can affect an individual’s credit score and credit report for a short period of time, usually up to two years. It’s important to limit the number of hard inquiries as too many can have a negative impact on a person’s credit score.
What Is Soft Credit Score Check?
A soft credit score check, also known as a soft inquiry or soft pull, is a type of credit inquiry where a lender or creditor requests to view an individual’s credit report without accessing their full credit score.
For instance, a card issuer checking an individual’s credit report to assess whether he or she is eligible to avail the credit card offers is a soft inquiry. Even an employer can conduct a soft inquiry before hiring an employee. Other instances of soft inquiries include insurance quotes, free credit score check via banking apps, credit monitoring services and more.
Unlike hard credit inquiry, your score is not affected by soft enquiry as such inquiries are not indicative of a business entities’ financial commitment. Soft credit inquiries may or may not be recorded in a credit report.
How to dispute hard credit score checks?
To challenge an unauthorised hard inquiry for a loan that appears on your CIBIL credit report, you can easily dispute it by contacting the credit bureau. The following steps can be taken:
1. Go to the official website of the CIBIL credit bureau to file an online dispute.
2. Access the “Dispute Resolution” section and complete the form accurately and truthfully.
The credit bureau will verify the dispute with the financial institution. However, CIBIL, being a credit bureau, cannot make changes to the report independently.
According to regulations, the lender has 30 to 45 days to settle the dispute once it has been raised.
3. When the issue is resolved, the credit bureau will notify you via email.
Note that disputing a hard inquiry will not guarantee its removal from your credit report, and it may take some time for the inquiry to be resolved.
How many hard credit score checks are recommended?
There is no specific number of hard inquiries that are considered too many as it varies depending on each individual’s credit history and profile. However, having multiple hard inquiries in a short period of time, such as within a few months, can be an indication to lenders that you are taking on too much credit or struggling financially. This can negatively impact your credit score and may make it more difficult for you to obtain credit in the future. It’s generally recommended to limit the number of hard inquiries as much as possible, and only apply for credit when necessary.
Soft Pull Business Loans by Razorpay
Having familiarised yourself with soft credit checks, you may be contemplating which lenders provide this type of business loans and whether it is suitable for your financial circumstance. In that case, you need not worry as we have the information you need.
Enter Razorpay Line of Credit, a revolutionary financial product that provides quick access to funds for your business. It’s an unsecured loan that can be used to manage day-to-day business expenses, purchase inventory, meet sudden expenses, and much more.
Here are some benefits of financing your business with Razorpay Line of Credit:
- Soft credit checks with your consent
- Quick and easy access to funds
- Flexible repayment options
- No collateral required
- Low-interest rates
Frequently Asked Questions:
- Will checking my own credit scores lead to a hard inquiry?
No, checking your own scores won’t result in a hard inquiry. It is a soft inquiry. Hence, it will not affect your CIBIL score.
- By how many points will my credit score drop after a hard credit inquiry?
Multiple hard credit inquiries will lower your credit score. For every new hard inquiry, your credit score will reduce by five points. Furthermore, such inquiries reflect on your credit report for at least two years.