If you make an application for credit, it can be listed on your credit report as a 'credit enquiry'. Credit enquiries can have an impact on whether a lender accepts your application or not. A credit enquiry may include the date, the type of credit you have applied for (a personal loan, credit card, mortgage or phone contract), whether you are a sole or joint borrower (including acting as a guarantor for another loan), as well as the amount.
What's involved in a credit enquiry?
What does a credit enquiry involve?
Let's take a look at a real-life example: David is buying a new car and he applies for a car loan with ABC Car Finance. David completes his application form and as part of the assessment on whether to accept his application, the credit provider conducts a credit enquiry. As a result of this credit check, David's application for the car loan will be recorded on his credit report. This is regardless of whether ABC Car Finance accepts his application or David decides to proceed with the loan. This credit enquiry will stay on David's credit report for five years from that date.
Do credit enquiries impact my credit report and score?
Many applications in a short space of time can be a sign of credit stress.
The type of credit applied for, the amount of credit and the number of credit enquiries over a period of time can all have an impact on your credit score.
One of the biggest impacts of credit enquiries that often catches people unawares, is 'shopping around for credit'. If you make a number of credit applications in a short space of time, it can result in a number of credit enquiries being listed on your credit report. This can have a negative impact on your score and the way lenders see you. Many applications in a short space of time can be a sign of credit stress.
How can you help avoid credit enquiries negatively impacting your credit report and score?
- Do your homework before you apply - research and compare different credit products before you make any credit application.
- Keep track of your credit commitments - only apply for credit if you really need it and remember that credit includes credit cards, personal loans, interest-free finance and any utilities contracts.
Do you know what credit enquiries are on your credit report? Get the latest copy of your credit report here.