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Mortgage Broker Q&A – Do credit searches affect my credit score and how many is too many?

Question: I have been told that credit searches affect my credit score, is this true?

Answer: Yes – but it depends on how many have been done and by whom.

When you apply for credit most lenders will use a credit reference agency to get a credit report of your borrowing history. This credit search will leave an imprint on your report, usually just saying the lenders name, date and the type of credit application.

It is typical for borrowers to shop around when applying for credit so having three of four credit searches in quick succession is not likely to cause you a problem, however if you have lots of credit searches within a 3 month period (I would say between 7-10 or more) then your credit score may start to be temporarily affected.

This is because of an assumption that if you are trying so many different lenders perhaps it is because you are being declined by them and are franticly trying to find a deal. For this reason you should always approach arranging credit in a systematic fashion.

Find out who has the best deals first, then establish whether or not your circumstances in terms of income, employment history and property type etc fits the lenders criteria before having a decision in principle. As brokers we always assess whether you are eligible to borrow with a lender based on all other information before approaching a lender for a decision in principle.

However if you do have a lot of credit searches and your credit history is reduced this does not mean that you will permanently affected. It is simply a risk assessment measure and as such most lenders will look at the number of searches in the last 3 months. I personally fell foul of this when I was about 21 simply by changing my mobile phone contract too much at the same time as shopping around for a personal loan, but after waiting a couple of months things returned to normal.

One thing that does not apply is searching your own credit report, this either wont show up or shouldn’t be taken into account as it is not a measure of risk. People of all financial backgrounds now check their own credit reports for a variety of reasons many of which have nothing to do with struggling to raise credit and for this reason this should not affect you credit score.

If you need help working out what might be affecting your credit score contact one of our mortgage advisors to discuss your circumstances on 08454594490.

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