What leads to a hard inquiry? These are the key factors to consider
Credit score is important for getting a loan approval. To maintain a good credit score, it is important to first keep track of it. And when you spot an error in credit score, it can be rectified. This checking of score in your credit report leads to a soft inquiry.
There is a misconception that a credit inquiry leads to loss of credit score. However, this happens when it is a hard inquiry and not a soft inquiry.
What is a hard inquiry?
A hard inquiry occurs when a credit user applies for a loan. This leads to the loss of credit score. Applying for too many loans indicates that the user is too desperate for a loan.
However, this leads to marginal loss of credit score. A soft inquiry, on the other hand, does not lead to any loss. When someone looks for his credit report, it leads to a soft inquiry and does not lead to any loss of credit score.
Hard inquiry: Key factors to consider
1. A hard inquiry may slightly lower your credit score (typically by 3–5 points).
2. A hard inquiry happens when applying for a credit card or when you apply for a personal loan, mortgage and car loan.
3. It is seen by other lenders. Other banks can see hard inquiries on your credit report, which may influence their decision.
4. Having too many hard inquiries is risky: Multiple hard inquiries in a short span of time may indicate credit risk, thus affecting your approval chances.
5. It remains on the report for a long time but impacts the credit score for about 12 months.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
For all personal finance updates, visit here
