What are the disadvantages of applying for a Home Loan in multiple banks simultaneously?
Why not apply together?
Have you ever applied for a loan across multiple banks hoping to get the best deal? If yes, then you should avoid doing so.
Applying for a loan in multiple banks at once will hurt your credit score. This will reduce your chances of getting the loan. In such a situation, the question is that if someone wants the cheapest loan, what should he do?
The answer is that one should smartly compare the interest rates of various banks. However, before we discuss how to do so, you should understand the difference between hard and soft credit inquiries and how they affect your credit score.
What is a hard inquiry?
Experts say that every time you apply for a loan, banks conduct an inquiry with the credit bureaus to assess your creditworthiness.
A direct inquiry initiated by a bank or financial institution in this way is called a hard inquiry. The bureau may lower a certain credit score for every inquiry made about you.
If you apply for a loan (such as mortgage loans, auto loan or credit card), the bank (with your permission) checks your credit report and credit score. It is checked by one or more of the major credit bureaus.
Since these inquiries are linked to the actual credit application. That’s why they are considered hard inquiries. This can have an impact on your credit score.
What is soft inquiry?
A soft inquiry happens when you check your credit report yourself or allow someone like a potential employer to review your credit report.
There is also a soft inquiry in cases when banks, insurance companies or credit card companies check your credit score to pre-approve an offer.
What you should do?
Each hard inquiry lowers your credit score when you apply for multiple credit products in a short span of time. The reason for this is because it seems that you are eager to take a loan. Banks often consider such customers to be risky.
Due to this, either the loan application is not approved or it is approved at a higher interest rate. Instead of offering multiple loan applications directly to the banks, you should visit the online marketplace and compare various loan options.
Apply in the one which is most suitable for you. By the way, such marketplaces also obtain your credit report for offering loans. But, these are soft inquiries. This does not harm your credit score.
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