When applying for loans or credit cards, many individuals worry about the number of inquiries reflected on their CIBIL report. A common concern is whether multiple inquiries negatively impact their CIBIL score and their chances of getting approved for credit. If you’ve ever wondered how inquiries affect your credit profile and what you can do to manage them, this blog will provide clarity.

Understanding Credit Inquiries

A credit inquiry occurs when a lender checks your CIBIL report to assess your creditworthiness before approving a loan or credit card application. There are two types of inquiries:

1. Hard Inquiries – These occur when you apply for a loan or credit card, and the lender pulls your CIBIL report. Hard inquiries are recorded in your credit history and may impact your score.
2. Soft Inquiries – These occur when you check your own CIBIL score or when lenders check your profile for pre-approved offers. Soft inquiries do not affect your credit score.

How Do Multiple Inquiries Affect Your CIBIL Score?

While a few inquiries won’t significantly impact your score, excessive hard inquiries in a short period can raise red flags for lenders. Here’s why:

• Indicates Credit Hunger: A high number of hard inquiries may suggest that you are desperate for credit, making lenders cautious.
• May Lower Your Score: Each hard inquiry can slightly reduce your CIBIL score, typically by a few points. Multiple inquiries in a short span can have a cumulative effect.
• Approval Chances Reduce: Lenders may assume a higher risk in lending to someone with multiple inquiries, leading to rejections.

Understanding Inquiries for Unsecured Business Loans

For businesses, especially those seeking unsecured business loans, multiple inquiries in a short period are common. Unlike personal loans, businesses often require funding from multiple lenders at the same time to manage working capital, expansion, or operational expenses. Here’s how inquiries impact unsecured business loans:

• Multiple Funding Sources are Normal: Businesses often seek credit from multiple lenders simultaneously, which leads to multiple inquiries on the CIBIL report.
• Lenders Consider Business Viability: While inquiries matter, lenders also assess cash flow, financial stability, and repayment ability rather than just the number of inquiries.
• Short-Term Impact on Credit Score: A temporary dip in the CIBIL score due to multiple inquiries can be expected but is usually manageable with strong financial discipline.

How Many Inquiries Are Too Many?

There is no fixed number of inquiries that will automatically harm your CIBIL score, but generally:

• 1-2 inquiries in six months are considered normal.
• More than 3-4 inquiries in a short period can be a cause for concern for individuals but may be justified for businesses.
• Frequent inquiries within a few months can lower your score and reduce your approval chances unless lenders understand the business need.

Ways to Manage and Reduce Credit Inquiries

If you are concerned about the number of inquiries on your CIBIL report, here are some steps to take:

1. Apply for Credit Only When Necessary

Avoid applying for multiple loans or credit cards at the same time. Instead, research and apply for financial products that best suit your needs.

2. Check Your Eligibility Before Applying

Many banks and financial institutions offer eligibility checks before you apply. Use these tools to understand your chances of approval before submitting a formal application.

3. Avoid Multiple Loan Applications in a Short Period

If you apply for several loans in quick succession, lenders may see this as a sign of financial distress. Space out your applications over time.

4. Monitor Your CIBIL Report Regularly

Checking your CIBIL report does not impact your score. Regular monitoring helps you stay informed about your inquiries and take corrective action if needed.

5. Negotiate with Lenders

If you have multiple inquiries due to rate shopping (such as comparing home loan options), some lenders may consider them as a single inquiry if done within a short period.

6. Use Pre-Approved Loan Offers

If you receive pre-approved loan or credit card offers, opting for them can help avoid unnecessary hard inquiries.

7. For Business Owners: Work with Financial Advisors

If you require multiple funding sources, consult a financial advisor to structure your loan applications efficiently, reducing the negative impact of multiple inquiries.

Final Thoughts

Having multiple inquiries on your CIBIL report is not always a bad thing, but managing them wisely is crucial. If you are an individual borrower, keeping inquiries minimal can help maintain a strong credit score. However, for business owners seeking unsecured business loans, multiple inquiries are often unavoidable but can be managed strategically. By understanding how inquiries affect your credit and taking proactive steps, you can improve your chances of securing the funding you need without significantly impacting your CIBIL score.

Need help managing your credit inquiries or securing a business loan? Get in touch with us today!