Does a loan application affect credit score?

Yes, a loan application can affect your credit score. When you apply for a loan, the lender conducts a hard inquiry by fetching your credit report from bureaus like CIBIL. This typically results in a minor, temporary dip in your score. While one application has a small impact, multiple applications within a short duration can significantly lower your score as they indicate credit-hungry behavior. To protect your score, it is recommended to compare offers using soft inquiries and space out formal applications by at least six months.