The surprising thing damaging your credit score
If you're struggling to get finance for your business or personal needs, it could be a poor credit score, and you may be surprised to learn that the reason for this is simply that you've been shopping around for a loan.
Enquiry listings on your credit files are a big red flag to lenders.
An enquiry listing is put on your credit file each time you apply for finance. The enquiry listing could be placed by a bank, credit union, car finance company, credit card company, phone company – almost anyone who extends you credit of some kind.
Why do these companies put enquiry listings on your credit file?
They do it because when you apply for a loan online or in person, you are required to give permission so that your credit file can be accessed. The reason they want to access your file is to see if you are going to be a good loan prospect. Every time you sign or check that box on an online application, a listing about that enquiry will appear on your credit file.
It's no wonder consumers become confused about this being a problem because we are encouraged to ‘shop around’ for virtually everything. You wouldn't hesitate do this for a TV or a car and so you do the same with finance. The online world we inhabit gives us, at our fingertips, access to real live competitive interest rate information as well as numerous benefits for jumping ship from your current lender to a new one. One or two credit enquiries per year on your file won’t affect your score too much but when it looks like you are shopping around for loans and failing, it is then that your score will take a big hit.
So, if you are seeking finance and are tempted to make multiple applications to multiple lenders at the same time, you should definitely resist the urge. It’s better to make one application, and if it fails, seek to find out why.
There are a number of reasons why a loan might be approved with one particular lender and not another. Talk to a qualified and experienced credit advisor and avoid credit score confusion.