Why you shouldn’t apply for multiple loans from multiple Lenders?

You might have heard the term “Credit Hunger”. In this post, We’ll understand the aspects of applying for multiple loans to multiple lenders?

Whenever a person applies for a loan in any financial institution. That financial institution requests your credit score from the credit bureaus. The first inquiry made by the financial institution is also known as a hard inquiry. Which means it will appear in your credit report.

When you apply for loans from multiple lenders. Each lender/financial institute will make a hard inquiry of your credit score separately.

When too many credit inquiries are made, it’s seen as a high credit risk. This means the lender/bank will consider your loan application risky to accept. This is because they have seen credit inquiries made by other Banks and NBFCs.

Whenever In a short period of time you take too many loans or too many credit inquiries made by the lender when you apply for a loan from different lenders. All of these activities will be visible in your credit report.

This means other banks and lenders can see that you have applied for loan at so many places.

It can also decrease your credit score by some points. There is no specific number to be decreased for multiple credit inquiries made by banks and lenders. It’s totally up to the algorithm of the credit bureau.

According to Experian(Credit Bureau), “Too many hard inquiries in a short period of time can be concerning to banks and lenders. Opening various new loans and credit accounts may mean you’re having trouble paying bills or are at risk of overspending. As a result, hard credit inquiries have a temporary and negative effect on your credit score.

If you have a requirement of a big amount, take just one loan instead of taking 10 small loans from 10 different lenders and banks. If you want to keep your credit score good avoiding taking multiple loans in a short period of time.

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