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19 Jun

Think before you apply for a loan

When you want to avail a loan you apply to various lending institutions. Don’t you? Also it is a common practice to apply to more than one lending institution for getting the best terms on the loan. 

So do you think making multiple applications is always helpful?  

An instant answer to this is of course – yes! But remember as you are waiting to get your best option, all your loan applications are tracked by the credit bureau. 

Each time you make a loan application, the lending institution obtains your credit report to judge your credit worthiness. This is reported on your credit report as an ‘Enquiry’.  

Let us understand how these enquiries impact you? 

Firstly, 10% of your credit score is calculated based on your enquiries and hence it has the potential to bring your credit score down.  


Secondly, high number of enquiries indicate a “credit hungry” behaviour which is viewed negatively by lending institutions. 


Thirdly, these enquiries would reflect on your credit report for a minimum of 7 years! 

So what is the solution to avoid a high number of enquiries? 

In this age of technology, there are various loan comparison platforms which would help you to compare the terms offered by various lending institutions. You can filter your choice and then apply to one that suits your need.  

Whilst each time a lending institution obtains your credit report it is reported as an “enquiry”, there is no harm if you check your own credit report. Instead, it is vital to monitor your credit report frequently (i.e. at least twice in a year) to avoid identity theft and keep a check on your score.  

Also if you have obtained your credit report and have found an enquiry which is not a result of an application made by you then you should raise a dispute with the credit bureau.  

Having a credit report which is true and factual to your credit history is always advisable. 

The trick is to apply selectively and wisely!  


Satish Mehta
Satish is a Chartered Accountant by education, a veteran of Housing Finance and a Credit Information practitioner with over 40 years of experience. He previously worked with HDFC Ltd – India’s largest mortgage finance company and was the founding Managing Director of CIBIL – India’s first and largest Credit Information Bureau. He has global experience in his chosen fields, is a Professor of Practice at a leading University and has written e-books for the World Bank on his subjects. He is passionate about learning & knowledge transfer & believes in giving back to the industry he worked in throughout his career.

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