Wealth advisors often recommend investors to keep checking their credit score from time to time. This leads to an array of advantages. You get to know whether there is an error in the credit report that should be rectified and by checking your score regularly, you can keep yourself updated of the changes in your credit report.
It is, meanwhile, important to note that checking your credit report leads to soft inquiry. Those who are not aware, a soft inquiry takes place when you check your credit score. There are other instances also when a soft inquiry takes place. For instance, when your financial institution pre-approves your loan or credit card and also when a company checks your score as part of background check.
These are the key points which one should remember.
I. Impact on credit score: As mentioned, a soft inquiry does not lead to any impact on the credit score. This means when you check your report on the website of a credit bureau, your score stands to remain the same.
II. Incidents that lead to soft inquiry: Three main occurences which lead to soft inquiry are as follows: when you check your credit score, when bank or financial institution gives an offer for a pre-approved loan, and finally, when an employer or someone carries out background check.
III. Different from hard inquiry: A hard inquiry happens when you apply for a loan from a bank or an NBFC. This leads to a marginal fall of credit score.
IV. Incentive for soft inquiry: Since soft inquiry does not lead to any fall of credit score, it is recommended to keep checking the credit report from time to time.
V. Accessible to lenders: When you carry out a soft inquiry, it is not visible to other lenders. So, there are little chances that you will receive loan offers from other banks. On the other hand, when a hard inquiry happens on your profile, it is accessible to other lenders, some of whom have deployed agents to make loan offers based on your profile.
(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.)
