If you make an application for credit, it can be listed on your credit report as a 'credit enquiry'. Credit enquiries are part of the information lenders may use and 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 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.
What's involved in a credit enquiry?
What are the impacts of a credit enquiry?
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 Equifax 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 Equifax Score and may impact the way lenders see you based on the credit information from Equifax..
Did you know....? Many applications in a short space of time can be seen as a sign of credit stress.
How you can manage negative impacts to your Equifax credit report & 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.
- Get a copy of your Equifax credit report to understand your past financial history and consider signing up to a subscription package to ensure you are kept up to date with changes to your Equifax credit report.