Impact of Multiple Loan Applications on Your CIBIL Score

Last Updated : June 7, 2025, 4:05 p.m.

Applying for a loan can be an essential step toward achieving financial goals—whether it’s buying a home, funding education, or consolidating debt. However, submitting multiple loan applications CIBIL can inadvertently damage your credit reputation and make it harder to secure favourable terms in the future. In this article, we’ll explore precisely how submitting several loan requests affects your CIBIL score, why hard inquiries matter, the role of loan rejection impact, and how application timing plays a crucial role in conserving your credit health. We’ll also provide actionable tips to mitigate damage and safeguard your credit score.

Why Borrowers Apply Multiple Times?

• According to TransUnion CIBIL, nearly 37% of Indian consumers who applied for more than one loan within six months saw their credit scores dip by an average of 50 points in 2024.
  
• With rising competition among NBFCs and banks, many borrowers cast a wide net—submitting multiple applications in hopes of securing the best interest rates.
  
• While well-intentioned, this strategy can backfire. Understanding the technicalities behind hard inquiries and strategic application timing is important to protect your creditworthiness.

What Is a CIBIL Score and Why Does It Matter?

The CIBIL score, which is in the range of 300 to 900, serves as a numerical gauge of your credit health. It reflects your creditworthiness. Lenders—such as banks, NBFCs, and credit card issuers—use it to gauge the risk of lending money to you. A score more than 750 is ideally considered good, reflecting low risk; scores below 650 often trigger rejections or higher interest rates.

Calculation components include:

• Payment history (30%): Consistency in paying EMIs and timely credit card bills
• Credit utilization (30%): Ratio of credit balance at present to total credit limit.
• Credit history length (15%): The total span of time your credit accounts have been open and in use.
• Credit mix (10%): Variety of secured (e.g., home loan) and unsecured (e.g., personal loan) credits.
• New credit inquiries (15%): Number of recent hard inquiries and accounts opened

Because new credit inquiries account for a significant portion of your CIBIL score, repeatedly applying for loans can trigger multiple hard pulls, directly impacting your score.

Tip: Check your credit report regularly via Wishfin’s free CIBIL Score Check to monitor any sudden dips before they become problematic.

Understanding Hard Inquiries vs. Soft Inquiries

Whenever you apply for credit, lenders request your credit report from CIBIL. This creates an inquiry on your report that can be either:

1. Soft Inquiry:
   
   • Occurs when you check your own score (self-check), when banks pre-approve you for offers, or during background checks.
     
   • Does not affect your credit score.
     
2. Hard Inquiry:
   
   • Happens when you apply for a new loan or credit card and lenders pull your credit report to assess creditworthiness.
     
   • Each hard inquiry remains on your credit file for up to two years, and impacts your score—typically dropping it by 5 to 20 points per inquiry, depending on your overall credit profile.
     

Multiple hard inquiries in a short span signal to lenders that you are aggressively seeking credit, raising red flags about your financial stability.

How Multiple Loan Applications Generate Hard Inquiries and Lead to Credit Score Damage?

When you submit several loan applications—be it personal loans, home loans, or credit cards—within a few months, each request generates a hard pull. Although a single inquiry might only drop your score marginally, cumulative inquiries can lead to significant deterioration, especially if your score was already borderline.

• Immediate impact: Every new application shows up as a hard inquiry on your CIBIL report. For example:
  
  • First application : –10 points
    
  • Second application within 30 days : –12 points
    
  • Third application : –15 points (if your existing score is lower, the impact is more pronounced)
    
• Combined effect: If you apply for three different loans in two months, you could see a drop of 30–40 points. This can push a previously acceptable score (~740) down to below 700—entering the “fair” category and making future approvals more expensive.
  
• Perception of risk: Multiple inquiries within a short window make lenders cautious. They may interpret frequent applications as a sign of financial distress or “credit-seeking” behaviour, causing them to:
  
  • Offer higher interest rates.
    
  • Impose stricter loan conditions.
    
  • Decline your application outright (see next section).

Loan Rejection Impact: Why Getting Denied Hurts Your Score More?

A loan rejection doesn’t directly lower your CIBIL score, but the underlying hard inquiry remains. In fact:

1. Hard Inquiry Stays: Even if the loan is declined, the inquiry still shows up, contributing to your credit score damage.
   
2. Higher Perceived Risk: Lenders see a string of rejections as evidence of poor credit health—making subsequent applications even more challenging.
   
3. Cycle of Denials: Each additional application increases the risk of rejection, creating a vicious circle where repeated “no’s” further dent your credit profile.

Pro Tip: Before applying, use pre-qualification tools that assess your chances without triggering a hard pull. This safeguards your score while helping you gauge approval likelihood.

The Role of Application Timing: Space Out Your Loan Requests

Application timing is a strategic lever to mitigate negative impacts:

• Bundled applications for same-purpose loans: If you’re shopping for a home loan, most credit bureaus (including CIBIL) treat multiple inquiries within a short “rate-shopping” window (typically 30 days) as a single inquiry. This prevents penalising rate shoppers unfairly. Always verify with lenders whether they report under the “rate-shopping” exception.
  
• Spacing out unrelated applications: For different loan types (e.g., home loan, car loan, personal loan), avoid applying within 30–45 days of each other. This spacing helps ensure each inquiry has time to “settle” and reduces the cumulative damage to your CIBIL score.
  
• Align applications with need: If you know you’ll need multiple credit products in the coming year, plan wisely. For instance, apply for credit card increases or personal loans at least three months apart to let your score rebound.

Action Step: Track your credit inquiries. Create a simple calendar reminder to avoid overlapping applications.

Actionable Steps to Minimise Credit Score Damage

1. Pre-Qualify Whenever Possible
   
   • Use Wishfin’s eligibility tools that perform only soft inquiries. This lets you compare offers without hurting your CIBIL.
     
2. Limit Unnecessary Applications
   
   • Prior to each loan request, ask yourself: “Do I really need this loan now?” If not, defer application.
     
3. Group Similar Loan Searches
   
   • When shopping for a mortgage or auto loan, request rate quotes within a 30-day window so all inquiries count as one. Confirm with the lender that they follow CIBIL’s “same-purpose inquiry” guideline.
     
4. Monitor Your CIBIL Report
   
   • Regularly check for discrepancies or unauthorized inquiries. Wishfin’s Free Credit Report can help you spot issues early.
     
5. Pay Down Existing Debts
   
   • Lowering your credit utilisation ratio (keeping it below 30%) can offset the temporary dip from new hard inquiries. A healthier utilisation rate reflects financial stability for lenders.
     
6. Make On-Time Payments
   
   • Maintaining a perfect payment history is the single best way to improve your CIBIL score. Over time, the impact of past hard inquiries lessens when you show a consistent record of timely payments.
     
7. Keep Old Credit Accounts Active

• Keep your inactive credit cards open, since doing so preserves the average age of your accounts and helps maintain a stronger credit score.

Conclusion: Strike a Balance Between Opportunities and Risks

Applying for credit is a normal part of financial planning, but it’s vital to avoid overreach. By understanding how multiple loan applications CIBIL creates hard inquiries, and how loan rejection impacts compounds the problem, you can make informed decisions about your application timing. Utilize eligibility checkers and credit-monitoring tools to minimize hard pulls, compare the best offers, and protect your CIBIL score.

Ultimately, the goal is to secure fair loan terms without relinquishing long-term credit health. By spacing out applications, grouping similar loan requests, and maintaining a pristine payment history, you’ll ensure that your creditworthiness remains strong—opening doors to better interest rates and higher approval chances in the future.