Does Checking CIBIL Score Often Affect it Negatively?

It is a common belief that checking the CIBIL score or credit report can often hurt your CIBIL score. However, this is not true. Based on the type of inquiry, your CIBIL score is either impacted negatively or not at all. For example, checking your own score does not affect it as it is considered to be a soft inquiry rather than a hard inquiry. Let us understand both these types of inquiries in further detail.

Soft inquiries, also known as soft credit pulls, are generated when your credit score is checked without being tied to a new credit application. They do not indicate higher risk and therefore do not affect your CIBIL scores.

Instances of soft inquiries include:

• Self-monitoring of your credit
  

• Credit checks by your existing creditors
  

• Employment Verification
  

• Credit assessment by a company for pre-approved offers
  
  

On the other hand, hard inquiries have a significant impact on your CIBIL score. Let us understand these better.

A hard inquiry, also known as a hard pull, happens when you seek new credit, like a credit card or loan, leading a creditor to review your credit file for risk assessment. Applying for too many credit options at once is seen as you looking to borrow funds you cannot repay, thus leading to a reduction in your score.

Instances of hard inquiries include:

• Credit checks for new loan applications
  

• Evaluation of credit history for rent applications
  

• Credit assessment for credit card applications
  

The two aforementioned forms of credit information inquiry methods impact an individual’s credit score at varying degrees. A CIBIL soft Inquiry, for example, has no impact on your overall score.

A hard CIBIL inquiry check, on the other hand, has an impact on your CIBIL score. As mentioned above, lenders conduct a hard CIBIL Inquiry check when an individual applies for a loan or credit card. This helps them understand your financial obligations and your debt-to-income ratio, thereby evaluating your creditworthiness. 

Credit bureaus keep tabs on the number of hard credit Inquiries made into a borrower’s credit profile. If the checks are infrequent, there is no impact on your CIBIL score. However, if multiple creditors go through an individual’s credit report often and in a short timeframe, the credit bureaus would categorise the borrower as credit-hungry. This will, in turn, have an adverse impact on his/her CIBIL score. Hence, it is advised to not apply for credit from multiple credit organisations at once as well as to keep an interval of at least 3 months between applications.

Making frequent applications for a loan from numerous lenders simultaneously is one of the few mistakes that a potential borrower can make. Thus, it is important to check your score and assess your loan eligibility prior to applying for a loan or a credit card. Let’s understand why checking your score frequently is essential.

Here are some reasons why you should regularly check your CIBIL score:

• Credit Approvals:

  It helps you assess your eligibility for a credit to identify offers you qualify for. This increases your chances of credit approval.

• Better Credit Management:

  Regular checks provide a clear understanding of your financial standing and creditworthiness. Monitoring your score encourages better financial habits like timely payments, which enhance your credit history.

• Error Detection:

  It enables you to identify and correct any errors or discrepancies in your credit report that may impact your score

• Fraud Detection:

  Regularly check your credit score and report to identify any false loan account entries resulting from identity theft

Keeping an eye on your CIBIL score through regular checks is healthy. It helps you mend your financial behaviour and maintain a good credit history. As mentioned before, refrain from filing too many loan/credit applications in a short time as multiple such hard inquiries can affect the CIBIL score. However, you can go ahead and check your CIBIL score whenever you need to without having any negative impacts on your credit score.