Credit inquiries in India: hard vs. soft explanations

In India, credit inquiries come in two forms: hard inquiries and soft inquiries. Understanding the difference between the two is essential for managing your credit score effectively. A hard inquiry happens when a lender checks your credit report while considering you for a loan or credit account. This type of inquiry requires your permission and can lower your credit score by 5 to 10 points. It stays on your credit report for up to two years. In contrast, a soft inquiry occurs when you check your own credit or when a lender does a preliminary check without your loan application. This does not affect your credit score and is not visible to lenders. The impact on your credit score is a significant difference. Hard inquiries can make it harder to get loans and may result in higher interest rates. Soft inquiries have no impact on your creditworthiness, making them less concerning. Another key difference is visibility. Lenders can see hard inquiries on your credit report for two years, while soft inquiries are only visible to you. This means hard inquiries can influence future borrowing opportunities. Consent is also important. Hard inquiries require your explicit permission. Without your consent, lenders cannot perform a hard inquiry. Soft inquiries, however, can occur without your permission when you check your score or when organizations check for promotional purposes. Examples of hard inquiries include applying for a credit card or personal loan, while soft inquiries happen when you review your own credit report or during job background checks. In summary, knowing about hard and soft inquiries can help you make smarter financial decisions and protect your credit score in the long run.