Hard Credit Checks Vs Soft Credit Checks: Key Difference and Impact on Credit Score
A credit inquiry, also known as a credit pull, takes place when a potential lender or authorized entity checks your creditworthiness. This is done by reviewing your credit history and current credit score through licensed Credit Information Companies (CICs) like CIBIL, Equifax, or Experian under the Credit Information Companies (Regulation) Act, 2005. Your credit score is calculated using key attributes including payment history, credit mix, length of credit history, credit utilization ratio, and the frequency of credit inquiries.
A credit inquiry on a credit report reflects how many times you have applied for new credit in the recent past. While a single hard credit inquiry does not have a major impact on your credit score compared to other factors like repayment defaults, it is imperative to monitor the number of inquiries showing up in your report. However, not all credit inquiries are the same, and each type carries a different weight regarding your credit score.
What is a Hard Inquiry?
A hard credit inquiry (or hard credit check) is executed whenever you formally apply for a loan or credit card. It is a detailed examination of your credit score by the lender to decide whether to approve your loan. According to TransUnion CIBIL, every hard credit inquiry lowers your credit score by a few points (typically between 5–10 points) and stays visible to lenders on your report for 24 months. However, the impact of the inquiry on your credit score usually diminishes within the first 12 months.
A hard inquiry will not affect your credit score much if you have an extensive credit history. On the other hand, too many hard credit inquiries in a short period can significantly affect your credit score. Lenders view "credit hungry" behavior as an early sign of risk, which may lead to higher interest rates or rejection under the Reserve Bank of India’s (RBI) Fair Practices Code (FPC) guidelines.
What is a Soft Inquiry?
A soft credit inquiry (or soft credit check) is a routine check often done without your explicit loan application. It is typically done when a person, company, or lender verifies your credit report as a part of background verification or pre-approved loan offers. In fact, checking your own credit score is a soft credit check and can be executed to review your own creditworthiness before you apply for a new loan.
Unlike hard credit inquiry events, soft inquiries do not have a negative impact on the credit score. They are essentially "invisible" to lenders and are only visible to you when you pull your own credit report.
Also Read: What Does a Zero or Negative CIBIL Credit Score Mean?
Difference Between Hard and Soft Credit Checks
Lenders and consumers use credit inquiries for very different reasons. While one is a "deep dive" for lending decisions, the other is an "informational check."
| Feature | Hard Credit Inquiry | Soft Credit Check |
| Primary Purpose | Formal loan or credit card underwriting. | Informational, marketing, or background checks. |
| Triggered By | When you formally apply for a loan at Hero FinCorp. | When you check your own score or for pre-approved offers. |
| Impact on CIBIL | Decreases score temporarily (usually 5–10 points). | Zero impact on your CIBIL score. |
| Visibility | Visible to all lenders for 24 months. | Visible only to you; other lenders cannot see these. |
| Consent | Requires your explicit permission/application. | Can happen without your knowledge (e.g., marketing). |
| Typical Examples | Personal Loans, Two-Wheeler Loans, Home Loans. | Own CIBIL check, Employer check, Insurance quotes. |
How Long Do Credit Inquiries Stay on Your Credit Report?
Both types of inquiries remain on your CIBIL report for the same duration, but their influence differs significantly.
1. Soft Credit Inquiries: 24 Months
- Visibility: These are listed in the "Consumer Disclosure" section of your report.
- Duration: They stay on your record for 24 months.
- Lender Access: At Hero FinCorp, we cannot see your soft inquiries when we pull your report. They are strictly for your reference to track who has viewed your profile for non-lending reasons.
2. Hard Credit Inquiries: 24 Months
- Visibility: These are prominently listed in the "Enquiry" section of your CIBIL report.
- Duration: They stay for 24 months.
- The "Fade" Effect: While they stay for two years, their impact on your score usually fades after 12 months. In many scoring models prioritize inquiries from the last 6 months to gauge your current "credit hunger".
Impact of Soft and Hard Credit Inquiries on CIBIL
Managing your inquiry count is a pillar of CIBIL score improvement. Here is how they influence your standing at Hero FinCorp:
| Inquiry Type | Short-Term Impact (0–6 Months) | Long-Term Impact (12–24 Months) |
| Hard Inquiry | High Risk: Multiple checks in 30 days signal financial distress and lower your score. | Neutral: The record remains, but the score usually recovers if no new debt is taken. |
| Soft Inquiry | None: You can check your score daily on the Hero FinCorp app without any penalty. | None: It remains a historical record for the consumer only. |
Examples of Hard and Soft Inquiries
Understanding the difference between these two inquiries is essential for CIBIL score improvement. While both provide a look at your financial history, their impact on your credit health is vastly different. Hard credit inquiries are typically triggered by formal loan underwriting, whereas soft credit checks are used for background verification or marketing.
| Hard Credit Inquiry | Soft Credit Check |
| Home or Auto loan application: Formal requests to banks for high-value secured credit. | Checking your own credit score: Using apps or bureau websites to monitor your profile. |
| Personal loan formal application: A lender's deep dive into your history for an unsecured loan. | Pre-qualified credit or insurance offers: Lenders checking your basic eligibility for marketing. |
| Credit card application: A request for a new revolving credit line from a financial institution. | Employment background verification: Employers verifying financial reliability during hiring. |
| Loan Against Property (LAP): A loan against property(LAP) Underwriting for mortgage-backed credit facilities. | Existing lender account reviews: Periodic "maintenance checks" by your current bank or NBFC. |
Conclusion
The basic difference to remember is that a hard credit inquiry takes place only when you apply for a new line of credit. A soft credit check, on the other hand, is executed for purposes like pre-approved offers and self-monitoring. If you are looking for a loan from a regulated NBFC like Hero FinCorp, it is often wise to ask for a "soft approval" or pre-qualified offer first to protect your credit score.
Frequently Asked Questions (FAQs)
Does Checking My Own Credit Score Reduce My Points?
No. Checking your own credit score is a soft credit check. It is considered a "consumer-initiated inquiry" and has zero impact on your credit score. In fact, under the RBI Charter of Customer Rights, regular self-monitoring is encouraged to ensure data accuracy.
How Many Hard Inquiries Are Considered "Too Many" By Lenders?
While there is no fixed limit, lenders like Hero FinCorp (a regulated NBFC) typically flag profiles with more than 3 - 4 hard credit inquiries within a 6-month window. This behavior, known as "credit hungriness," can lead to loan rejection or higher interest rates as per the Fair Practices Code.
Can I Remove A Hard Inquiry From My Credit Report?
You can only remove an inquiry if it is unauthorized or fraudulent. If you did not apply for a loan but see an inquiry, you must raise a dispute via the CIBIL or Experian online dispute portal. Legitimate inquiries from applications you initiated cannot be removed and will stay on your report for 24 months.
Does A Soft Approval Guarantee A Personal Loan?
No. A soft approval in a personal loan is a preliminary eligibility check based on a soft credit inquiry. Final approval depends on the verification of your documents, physical/digital KYC, and a final hard credit check conducted during the formal underwriting process.
How Long Does It Take For My Score To Recover After A Hard Inquiry?
The initial dip (usually 5–10 points) is temporary. If you maintain healthy repayment habits and do not trigger further inquiries, your score typically recovers within 3 to 6 months.
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