Applying to multiple lenders at the same time for a loan will hurt your CIBIL score and bring down your chances of getting a loan today and in the future.
As a savvy entrepreneur, when you need business funding, you probably do your research, shop around for the right business loan product and the best loan terms for your needs, and then apply with a few lenders on your shortlist.
What if we told you applying for business funding with multiple lenders within a short period could backfire and reduce your chances of getting the loan, even if you’re just shopping around for the best deal? Continue reading to understand why you shouldn’t apply for a business loan with multiple lenders and what it does to your chances of getting a business loan.
What is the difference between a hard pull and a soft pull of my credit report?
Once you’ve done your research and identified the lenders you want to apply with, you will fill out the business loan application forms and submit them to the lenders along with the necessary supporting documents needed to assess your application and sanction your loan. At this point, you may still be shopping around for the best business loan terms for your needs.
Once the lender has your application, the lender checks your credit and financial history to build an in-depth understanding of your profile. They do so by pulling your credit report from one or more of the four credit bureaus in India. These bureaus include TransUnion CIBIL and Experian. When a lender does a pull of your credit report, it is usually associated with a credit request. Therefore, it is considered a hard pull of your credit report.
Alternatively, when you check your own credit report, it is classified as a soft pull. Such enquiries can be made by you, your employer or landlord, or even a financial services company. Since these aren’t requests made by a lender and aren’t associated with a credit application, they have no impact on your credit score.
What happens to my credit score when I apply for a business loan with multiple lenders?
As mentioned above, when you submit your business loan application, the lender must check your credit report to understand your credit history. So, they do a hard pull of your credit report. Applications with multiple lenders mean many hard enquiries about your credit report within a short span of time.
Too many hard pulls of your bureau report within a short period can negatively impact your credit score, reducing your chances of getting the business loan you need to grow! This is because a lender may think multiple hard enquiries in quick succession means your business is in a cash crunch or that you are having difficulty finding a lender willing to lend to you.
So, instead of helping you find the best business loan deal out there, this strategy may end up bringing down your credit score and reducing your chances of getting a business loan. Thankfully, hard enquires only remain on your credit report for two years, and the impact they have on your credit score also reduces over time.
What’s the alternative option that helps you shop around for business loan products while also protecting your credit score? Check whether you meet the lender’s eligibility before you apply for the loan, submit one or maybe two applications maximum at once, and use a financial service, like CreditEnable, to find the perfect business loan for your needs!
How does CreditEnable help me get my business loan and protect my credit score?
CreditEnable is a multi-award-winning financial technology company. Our mission is to enable affordable business finance for all SMEs when they need it. We partner with over 25+ leading Indian and international lenders, who offer more than 100 specialized SME loan products to our customers.
When you apply for a business loan using our technology platform, we first check your eligibility for the loan. This includes checking your basic business information and vintage, financials, and your Experian credit score. Since we are not a lender or an NBFC, your application is still not attached to any request for credit, so this is a soft pull of your credit report and has no negative impact on your credit score.
We care about your business and financial health, and we understand that the loan underwriting process can be stressful. So, if after our initial assessment we find that you aren’t currently eligible for a business loan from one of our lender partners, we tell you upfront. We won’t push your application to a lender partner just to have them reject it, causing your credit score to take a hit.
Instead, we’ll tell you why you aren’t eligible right now – whether your business vintage (age) is too low, your minimum business turnover isn’t high enough, or your credit score is too low – and how you can fix it to become eligible for the business loan in the future.
If you are eligible, we’ll match you with the lender most suitable for your funding needs. This increases your chances of getting the business funding you need and streamlines the borrowing process so you can get your money quickly and easily.
By not sending your business loan application to multiple lenders we help you maintain, if not improve, your credit profile and successfully get the business loan at the best possible loan terms.
Business Loans. Enabled Simply.