Here at Nifty Loans, we get a lot of questions from customers asking us if we conduct credit enquiries (also called checks) and how this impacts their credit file. Credit files can be confusing to say the least, as there are several factors that make up a file and the score presented by a credit bureau. We thought we would provide some information about credit checks so you know what to look out for when reviewing yours.
When it comes to credit file information, there are a few different types of information that you might be aware of, but not really understand. Here is a breakdown of a few key terms:
In this article, we will be focusing on Credit enquiries (also known as credit checks). For more information on the other types of credit reporting data, you can check out our blog for upcoming articles!
In short, yes. Whenever a credit check is conducted, a “credit enquiry” will be placed on your credit file. This allows other lenders to see a person’s application history and to whom. It doesn’t necessarily mean they have been approved for the loan; it just shows how often a person is applying for finance.
When an enquiry is placed on a credit file, the information relevant to the application is shown on the report. This allows other lenders to view the customer’s previous financial history and get an idea of their current situation. When an enquiry is conducted this will show:
Now that we know what information is recorded in a credit check, let’s dispel some of the myths about what is not recorded. When an enquiry is left it does not show:
If a lender can see enquiries from other institutions or lenders, they may ask for more information such as a copy of the loan contract to confirm how much has been approved, as well as the repayments.
If a lender is signed up for Comprehensive Credit Reporting, some of this information may be available in a comprehensive credit report, however, this is different from a credit enquiry.
Business’s conduct credit checks as it is essentially a requirement before the business can access the consumers credit file and other credit reporting data. Think of this as an exchange between individual businesses and the credit reporting bureaus.
For the majority of lenders, checking credit is a part of the assessment process as this gives a big indication as to a person’s financial history. Credit scores will be one of the first things lenders look at which indicates the individuals financial history. It can also show previous repayment history to other commitments, any credit defaults as well as enquiries. Most lenders like to see good repayment history, low debt and no missed or late payments in order for them to consider offering the applicant loan.
One of the biggest unknowns for many people when it comes to credit checks is that shopping around for credit can have an effect on your credit score. Every time an enquiry is conducted, regardless of whether the credit was approved, it can impact the person’s credit score, either positively or negatively.
As credit scores can change month to month and are updated each time new information is added, it is always best to contact the lender directly before applying to see if they will conduct a credit check as part of their assessment. This is another reason you should only apply for credit when you need it.
Depending on the individual credit bureau, such as Equifax, Illion or Experian, over time the type of credit, the amount and the number of credit enquiries can have an impact on your credit score. This varies from each credit bureau as they all calculate enquiries differently.
If you would like to view your credit report, by law you are entitled to get one free copy of your credit report every 12 months. There are several ways to get this:
If you would like to look into your credit report further throughout the year you may be able to receive a more detailed report however, there may be additional fees associated with this.
Each lender will have their own set of criteria as to how they look at the information shown on the report.
They will often take into account the number of enquiries on the report and who they are too. If there are a number of recent enquiries in a short amount of time, a lender may see this as a sign of financial hardship and decide against offering the loan.
Credit enquiries to certain types of creditors may also impact how other individual businesses view the credit file. For example, some long term mortgage lenders may view small amount credit enquiries negatively. Again, this is something that individual businesses decide and have their own rules for.
Here at Nifty Loans, we understand that people are going to have some credit enquiries from time to time. While some lenders look unfavorably on multiple credit enquiries, Nifty will look at your whole financial picture, and the reasons for the enquiries. In cases where there are multiple enquiries on a file in a short space of time, rather than decline an application, we will often confirm if the credit was taken or not and base our assessment on affordability.
Hopefully, this post has provided some useful information on credit checks and how they might impact you. If you have any more questions, please don’t hesitate to get in contact with us. For specific information about your credit scores, you can also contact each of the three credit bureaus for your score with them and how this was calculated.Apply Now
Since founding Nifty in 2016, Bell has continued to make waves within the local financial sector for his continued ambition and willingness to adopt emerging technologies.Read More