Credit score checks were primarily seen in two forms: hard and soft. A soft check is when you check your score and download a copy of your credit report. A hard check or pull happens when you apply for a loan or a credit card, and the loan or card issuer requests the credit bureau for your score and credit report.

You can check your credit score as many times as you want though once a month is enough. A soft check has no negative or positive impact on your score. Your score will not change because you checked your score.

On the other hand, hard checks have been known to lower your score marginally. This is one reason why it’s recommended not to make too many loan applications in a short period unless you want considerable credit score damage.

The concept of soft and hard checks has confused some folks who believe all credit score checks are harmful. This is a myth — one that we’ve spent considerable time debunking. But here’s another positive development that will put the minds of consumers at ease: hard checks are now less likely to damage your credit score.

I had the pleasure of interacting with Manish Jain, managing director, for Experian India. Experian is one of the four credit bureaus operating in India. And what he shared during the interaction should be a eureka moment for credit score watchers.

“We have to bust this myth of inquiries having an impact on scores,” Jain said. “They used to in the past. Now it’s very clear the bureaus do not use inquiry information.”

Elaborating on the point of soft and hard pulls, Jain pointed out that credit pulls were a standard procedure conducted by banks and financial institutions to assess creditworthiness. This routinely happens, for example, when a bank considers offering a customer a better financial product.

Additionally, customers may initiate multiple credit pulls. These inquiries may be conducted not only to evaluate credit but could also be tied to initiatives aimed at enhancing financial literacy or driven by an individual’s curiosity about their credit standing.

But thanks to the guidance the industry had provided, we now know that one large credit bureau — Experian — has stopped using hard queries as a data point for score computation. This is a consumer-friendly move.

It must be clarified though that no other bureau has reportedly taken this route. The computation of your credit score by them would, therefore, continue to be impacted by hard checks.

Revisiting algorithms

Credit bureaus keep revisiting their algorithm to update it in meaningful ways. For example, in India, it’s quite common for people to shift homes or have multiple phone numbers. But your Aadhaar can be linked to only one phone number or address.

When you apply for a loan, these linkages matter in establishing your identity. From the point of view of your score, these are five different data points and have the potential to impact your score. However, the existence of these data points does not mean that the customer is a fraud trying to cover up a problematic credit history. He may have multiple addresses or phone numbers for genuine reasons.

Jain provided an example where someone may have taken five different loans from five different banks and linked them to five different phone numbers. What would be the impact of this on the score?

“The beauty of the credit bureaus is they have learned from that behaviour as well,” Jain said.

“Sure, you might have multiple addresses, but would it have an extremely negative impact? Maybe not. Bureaus keep visiting the algorithms to see the impact of such attributes and that’s how their dependence on the scorechanges.

Demographics matter

Jain added that demographics do impact your score. “So if you’re changing your house, you’re changing your mobile number, you should proactively go to your credit institution to update that information and be as consistent as possible,” he said.

It is important to recognise that frequent inquiries on a credit report do not necessarily imply an intent to defraud the lender.

Consumers often participate in these inquiries without any intent to deceive; discrepancies such as entering different contact details across platforms usually stem from using multiple personal connections. These are common practices and do not inherently indicate any attempt to manipulate the system.

Last, the differences in credit score algorithms may mean that there may be a noticeable difference in your scores across bureaus. But as Jain said, this doesn’t matter. What matters most is that your score on any bureau is trending in the right direction — past 750 and into the 800s, where you can get the best loan offers.

This update reflects a new paradigm in credit scoring. With greater awareness of credit health developing among Indians, we are also seeing attempts from the bureau to make credit scoring fairer, more transparent, and more consumer-friendly.