Anything that we wish to buy, most products at least, we can compare their features and make an informed decision. While searching for a loan, the situation is no different. In fact, it is considered good to shop around for offers and deals before selecting the one which is the best match for your need. There are various loans like home loan, vehicle loan, personal loans etc. and the rate of interest, tenure and eligibility criteria differs for each of them. There are also many banks, NBFCs and Fintechs too that are giving out quick loans and all the terms and criteria have variations. The interest rate charged, and the tenure has a significant impact on your loan. Therefore, it is quite important to look around, negotiate and choose a loan that gives you the ideal deal.
But, it is often said that making multiple enquiries can negatively affect your credit score. This often deters many from shopping around and sticking to the first loan offer that was made to them. But, it is not so, only “hard pulls” or hard enquiries made by credit institution after being authorized by you is considered and makes an impact on the credit score. The credit enquiries constitute 10% of your overall credit score. So, a single instance will not have an impact, however, multiple enquiries made in a limited amount of time will. So, what is the solution for this predicament, wherein you would like to know about offers by different institutions, however, it will negatively impact your credit rating.
To overcome this situation, it is important to know the difference between “hard pulls” and “soft pulls”. A Hard pull is when a financial institution requests your credit report from the credit bureau after being authorized by you. This is often done when a loan application has been submitted to a financial institution. Soft pull, on the other hand, is when you request your credit report to monitor the score or check for discrepancies. Also, when your lender or bank performs periodic reviews and checks the score it is considered as soft pulls and these do not have any effect on the CIBIL score.
It is therefore advisable that you do a preliminary check and know the eligibility requirements of various lenders and then also check your credit report before selecting a lender. In case, your score is not ideal, you can take corrective measures to improve the same and then apply for a loan. That way round, you will apply for a quick personal loan with only one lender after careful consideration of all possible offers and only one lender hard pulls your score from the credit bureau. Sometimes, multiple enquiries reflected on your report may be a case of identity theft too. Careful and periodic soft pull by you is important in checking for such discrepancies and also to take preventive and protectives measures to safeguard the credit history.