Think before you apply for a loan

August 28, 2014 . FundsIndia Desk

This article is a contribution towards our financial literacy series. It has been written by a specialist in credit and debt counseling – Satish Mehta, Founder and Director of

03loan3When 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 to analyze and select the best loan that offers the lowest interest rate. Do you think multiple loan applications are helpful to you?

An instant answer to this is of 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 reflected on your report as an ‘Enquiry.’

Let us understand how these enquiries impact you?

– Firstly, 10% of your credit score is calculated based on your enquiries. Hence, it has the potential to bring your credit score down.
– Secondly, a high number of enquiries indicates a “credit hungry” behaviour. This 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 compare the terms offered by various lending institutions. You can filter your choice and then apply to the 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 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 the 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 is the Founder and Director of – a credit and debt counselling company that provides end to end customized counselling to individuals by handholding them through their credit life cycle.

Get FundsIndia’s articles delivered straight to your inbox!

Enter your email address to get:

  • Mutual fund recommendations from experts
  • Buy, hold or sell calls for stocks
  • Investment tips and tricks
  • All the latest news from

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.