Cancel Home Loan Application - Will It Affect My Credit Score?

If you are looking to take a loan, making enquiries, especially hard enquiries, are a part of the process. Once, you are satisfied with all the information, only can you go ahead with a loan application process. Moreover, the bank also takes into account multiple factors, including your credit score for giving you a loan.

It is a number that denotes your ability to repay any possible debt that you may take in the future. This is dependent on various factors such as your debt history, repayment history, the loan application enquiries, etc. The loan amount, as well as the interest rate, also depends on the credit score.

As already discussed, that loan application requires you to make hard enquiries, which makes the bank look into your credit score. This also registers your present enquiry with the credit bureaus. These enquiries do not have much impact on your score if you are regular with your repayments and repay it in the prescribed tenure. However, a high frequency of enquiries can definitely have a more negative effect on the score.

Once you enquire for a loan, the credit enquiry is also made with the credit bureau. So even if you cancel the loan application, the impact on your credit score is already made. However, if the application is cancelled before any credit enquiry takes place, there would not be an effect on your score. Furthermore, if a loan amount is sanctioned, the credit score has already taken a hit due to the actual loan, so again there is no effect to it after you cancel it post sanctioning of the loan. Therefore, merely cancelling a loan application does not impact your score. Rather the process, be it the sanctioning or the hard enquires, associated with it does.

Prepayment of loans has a positive effect on your credit score because it reduces your credit utilisation while also significantly improving your debt-to-income ratio. Moreover, it also indicates that you are reliable as a borrower, and you have the ability to repay loans.So, if you already have a low credit score or have already availed multiple loans, it is advisable to be absolutely sure before making any hard loan enquiries.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.