Does Checking Your CIBIL Score Impact Your Credit Score?

Your CIBIL score is a crucial part of your financial health. It can directly affect your eligibility for loans, credit cards, and other financial products. While a good CIBIL score can open doors to better financial opportunities, a low score can limit your possibilities. It's also prudent to check your score regularly to understand your current standing, identify areas for improvement, and detect any inaccuracies in your credit reports. However, many often wonder whether checking their CIBIL score can negatively impact it. Although certain credit inquiries can harm your credit score, the belief that checking your CIBIL score will reduce the score typically stems from a misunderstanding of how credit scoring works.

Hence, Urban Money presents a detailed overview of all your concerns regarding CIBIL score checking. We will primarily discuss how checking your CIBIL score impacts it, the expected effects, and the safest way to check your CIBIL score without affecting it.

Does Checking Your CIBIL Score Affect It? True or False?

The short answer is false. Checking your CIBIL score is considered a soft inquiry and does not impact your credit score. People often get confused because they fail to understand the different types of credit inquiries and how they affect credit scores. When you check your score, it’s a form of self-awareness and financial responsibility, not a risk indicator to lenders. Nevertheless, it’s essential to understand the difference between the inquiries made on your credit report, as they affect your credit score differently. There are two major types of inquiries, known as hard inquiries and soft inquiries.

Understanding Soft Inquiries

A soft inquiry is a type of credit check. It occurs when you check your credit or when a lender reviews it for pre-approval offers. Employers, landlords, and insurance companies also use soft inquiries during background checks. These checks help assess your creditworthiness without linking to a specific credit application.

However, soft inquiries do not affect your credit score. It may appear on your credit report but is only visible to you, not to potential lenders. The primary purpose of soft inquiries is to give individuals and businesses an idea of your credit standing without impacting your score. Moreover, regularly checking your credit score is a good practice. It lets you stay informed about your credit health and catch any discrepancies or signs of identity theft early. Many financial institutions and credit monitoring services offer free credit checks under soft inquiries.

Understanding Hard Inquiries

Hard inquiries occur when a lender or financial institution checks your credit score as part of a loan or credit application process. Unlike soft inquiries, which are only visible to you, hard inquiries appear on your credit report and are visible to other lenders. These inquiries further signal that you are seeking new credit, which can influence lenders’ perceptions of your financial stability. Namely, when you apply for a new credit card, mortgage, auto loan, or any other form of credit, the lender will perform a hard inquiry to evaluate your creditworthiness. This inquiry type helps lenders assess the risk of lending you money based on your credit history.

These types of credit checks reduce your credit score. Though this impact is usually minor and short-lived, having multiple hard inquiries within a short period can have a more significant effect. So, managing the number of hard inquiries on your credit report is vital. Space out your credit applications over time to minimise the impact on your score. Being mindful of when and why you apply for new credit can help you maintain a healthy credit profile and avoid unnecessary drops in your credit score.

How do Credit Score Inquiries Impact Your Score?

Checking the CIBIL scores will reduce your score or not ultimately based on their type. As mentioned above, the two types of credit inquiries are hard and soft. And each hard inquiry can lower your credit score by a few points, typically 5 to 10 points. It may affect your score for about 12 months but stays on your credit report for up to two years. However, the impact can be more significant if you have multiple hard inquiries in a short period. This is because multiple inquiries can signal to lenders that you urgently need credit or may be experiencing financial difficulties, which could increase your risk in the eyes of creditors.

On the other hand, soft inquiries occur when you check your credit score or when companies review your credit report for non-lending purposes, such as background checks. These inquiries are only visible to you and do not affect your credit score. Understanding the distinction between these inquiries helps you manage your credit health effectively and avoid unnecessary score reductions.

Why is it Important to Monitor Your CIBIL Score?

Monitoring your CIBIL score is essential for maintaining good financial health. It helps you understand where you stand financially and identify any potential issues. Regular checks can further help you spot errors on your credit report. These errors can hurt your score if left uncorrected. However, whether checking your CIBIL score reduces it  or not, it is important to understand how monitoring your CIBIL score regularly to maintain a better one:

• Loan Eligibility: A strong CIBIL score is often the first checkpoint in your loan application journey. Lenders perceive a high score as a testament to your financial discipline, enhancing your prospects for loan approval.
• Interest Rates: Your CIBIL score is a bargaining chip for negotiating interest rates. A commendable score can unlock lower rates, translating to significant savings over your loan tenure.
• Credit Card Approvals: Credit card issuers scrutinise your CIBIL score to gauge risk. A higher score can smooth the path to premium cards with attractive rewards and benefits.
• Rental Agreements: In metropolitan hubs, landlords might assess your CIBIL score to predict rent payment behaviour. A favourable score can facilitate smoother negotiations and lease terms.
• Job Opportunities: Certain employers, especially in finance-related fields, may consider your CIBIL score reflective of your reliability. A solid score could thus be influential in securing employment.
• Financial Security: A healthy CIBIL score is akin to a safety net, offering you the leverage to access credit facilities during unforeseen financial needs or opportunities.

Does Credit Check Reduce Credit Score?

There is no decrease when you check your own CIBIL score. Nevertheless, checking your CIBIL score will reduce your score when you make a hard inquiry. Namely, a single hard inquiry can lower your score by 5-10 points. The exact impact varies depending on your credit history. If you have a strong credit history, the effect will be minimal. However, the impact can be more significant if your credit history is short or has issues. Remember, the effect of hard inquiries is temporary. Your score can recover within a few months, provided your report has no new negative entries.

What is the Safest Way to Check Your CIBIL Score?

Soft inquiries are the safest way to check your CIBIL score without impacting it. Numerous financial institutions and credit monitoring services offer free credit checks that fall under this category. Additionally, you can directly access your CIBIL score through the official CIBIL website or other authorised credit bureaus. These checks are designed to be consumer-friendly and do not count as hard inquiries. Using these services ensures that your score remains unaffected while you stay informed about your credit health.

It is also important to note whether checking CIBIL scores will reduce the score or is based on the type of inquiry you make. Hence, understanding the difference between soft and hard inquiries is crucial. It helps you manage your credit health effectively. Regular monitoring of your CIBIL score can further help you maintain a good credit score and detect any issues early.

Following is the step-by-step guide to checking your CIBIL Score via the official CIBIL website:

• Step 1: Visit the official website of CIBIL.
• Step 2: Click the ‘Get Free CIBIL Score & Report’ button.
• Step 3: Enter your details, such as name, email, mobile number, and PAN.
• Step 4: Click on ‘Accept and continue.’
• Step 5: You will receive an OTP to the entered number.
• Step 6: Enter the OTP and select ‘Continue.’
• Step 7: Click ‘Go to dashboard’ to view your CIBIL Score and Report.
• Step 8: Download the report as a PDF if needed.