How a Soft Inquiry Can Lead to Loan Disapproval?

EPF Last Update: September 29, 2020

A soft inquiry technically doesn’t affect your credit report. It’s something like only checking your credit report without officially applying for a loan. It’s like you only ask could you be approved for a loan.

A hard inquiry means that you officially apply for a loan. Hard inquiries lower your score with few points. Most legit lenders perform soft inquiries at the beginning of the application process, so they don’t lower your credit score. A hard inquiry is performed later on the application process after you approve the loan offer.

Why is that?

Well, it’s like lenders feel that you apply to many places and try to get many loans, which is something that they don’t like. Probably you are not sure what you are doing…

So, Why and How a Soft Inquiry Can Affect Your Loan Approval?

Soft inquiries don’t affect your credit score, but in some rare cases, they can lead to loan disapproval. We will give you one unique case.

Example – The Wrong Way

You are with bad credit. You have many negative items on your credit report. You have many multiple loans, probably most of them are payday loans and you are in a debt cycle.

In cases like these, most people act fast without thinking about the consequences.

And … you go and apply for multiple loans, hoping that by applying at 100 places, one or few of them would approve you. And actually, lead you more deeply into the debt cycle that you are now…

By applying to so many places, lenders perform a soft inquiry which means that they see your bad credit history.

And they achieve it!

Very soon you understand that it wouldn’t be possible to get any loan, because of your bad credit history and financial situation.

Or you still receive some money but … this is like your last loan.

Because the debt cycle is not endless. You getting loan after loan and start feeling confident that this will continue, but there will be one day that NO one will give you money!

After that, you understand that the only way to get out of this situation is to work on your credit report or financial situation.

You start working on your credit report, you successfully succeed to delete many items and you increase it!

You successfully succeed to pay a lot of the loans and get out of the debt cycle.

Now you are in a better situation!

And now, you go to these same lenders and apply again, explaining to them that the circumstances have changed.

You are almost sure that based on your new and significantly improved credit report and financial situation, you will get a loan. You actually you meet all lenders criteria!

But … they disapprove you again!


Like we said before, lenders have already achieved your bad credit history and financial situation that you were before!

They know that something with you wasn’t ok a time ago. And they still feel that you are risky!

The Solution

We can’t say that there is a quick and fast solution to cases like these. Time is the only solution to this. Lenders have to see that for a relatively long period of time you change. You don’t get a loan after loan. You work on your credit report and so on.

And here is how the soft inquiry helps you get disapproved!

Now, let’s see what would happen if you weren’t apply for many places and wasn’t reveal your credit report with so many lenders?

Another Example – The Right Way

You are in the same situation as in the previous example.

You are with bad credit. You have many negative items on your credit report. You have many multiple loans, probably most of them are payday loans and you are in a debt cycle.

In cases like these, most people act fast without thinking about the consequences.

But, this time you are NOT among these people!!!

You wait!

You don’t apply.

You discuss with a loan expert and understand that it wouldn’t be possible to get a loan, even if you apply with these 100 lenders!

And you change things. You succeed to get out of the debt cycle, you succeed to increase your credit report. The negative items or the opened accounts are not in your credit report now.

And now you apply for a loan. You meet the lender’s criteria.

Now you are approved!

How and why this happens?

The truth is that in the previous example lenders have already achieved you. In this example … you slightly stretch the truth. Because now, with you improved credit report and financial situation lenders can’t know your situation that you were before. And then they approve you.

There is a Strong Communication Among Lenders – Know That!

You probably think that even if this happens to you, and even if one lender disapproves you, because of your bad credit history a time ago, you will go to other lenders and get a loan without a problem. Actually, this would be possible, but you have to know that there is communication between lenders. This is a problem that is not disclosed officially and even we don’t know exactly how it works – who with who share information. But this is a fact, that not many financial blogs share!

Some lenders are partner companies. Other are sub companies of some big companies.

Example. Small looking loan site, or a local lender. Who do you think to finance them? Are you sure that these are not a big financial institution that also funds more companies like this? Are you sure that this is not even a big bank?

Here is what we’d recommend!

If You are in Financial Trouble, Don’t Get Fast Decision!

If you would think about that before, things would change!

But how to think correctly when you are not a financial expert.

That’s why we highly recommend that you spend some time learning about your finances. Always spend some time on financial blogs. They can save you a lot of trouble.

But in a serious financial situations like this, the best way would be to get help from a financial specialists.

To pay money, in a situation like this?

Yes and no.

Paying money for help definitely could save you a lot of money and problems, but know that there are many experts that would give you help for free. There are many companies that are totally free. They get a percentage of the loan company only if you are approved, so you pay nothing.

We hope you learned something today and you are on a way to improve your financial skills.

The case that we explained today is unique, and in most cases, it affects these with very bad credit or financial situation.

One more thing!

Don’t wait!

You should always work on your credit report.

Like many Americans do.

Do you know that according to our latest study the average credit score is 706, which is in the good credit stand?

And it only increases.

This proves that most people understand this problem and work on it.

Please, be one of them. So one day you’ll read posts like:

How to Get Super Cheap APR if I’m with Excellent Credit?

Instead of posts like this one.


Be careful with loan games. In the beginning, you feel great because you feel how easy is to get money. But, these are money that is NOT yours! If you plan to play with loans, educate yourself on that topic and play it safe because the consequences can be serious one day. There is NO such thing like life on a loan. Be careful!

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