Shopping around for the best deal is something that we are encouraged to do, we all want to find the best rates or the best deals available on the market. Be that for a credit card, a personal loan, or a mortgage. We are flooded with options and can often save a lot of money by shopping around, doing our due diligence.
People encourage shopping around for the best deals, it is an extremely wise thing to do. It is also just as wise to understand what impact that has upon your credit score.
What is an enquiry?
Every time you apply for credit with a potential lender or a financial institution, the credit provider will ask you to agree to their terms and conditions.
Usually one of those terms and conditions is they will request your permission to access your credit report and perform their due diligence on what level of risk you are as a customer for them, and if they want to do business with you, by providing you with their goods or services now, with payment in a future date.
This is called an enquiry. There are two (2) types of enquiries. A soft enquiry, or a hard enquiry.
Hard enquiries specifically refer to instances when a lender accesses your credit report for the purpose of evaluating you as a borrower to decide whether to approve or deny your application for credit. Examples include:
✓ A credit card company checking your credit after you applied for a card
✓ A bank checking your credit because you applied for a car loan
✓ A telecommunication company checking your credit before signing you up for a mobile phone plan
Fix Bad Credit, will do a “soft” enquiry. Soft enquiries aren’t linked to a specific application for new credit and therefore will have no effect on your credit score. An example of a soft enquiry is you or us applying for your credit report, an enquiry carried out for marketing purposes, and some credit services will use a soft enquiry to assist with their decision-making process, before they pre-approve you as a client, and offer you credit with terms.
Credit enquiries occur whenever someone accesses your credit account. The Credit Reporting Agencies note this information, recording the date and the name of the company or entity accessing your information. A number of hard enquiries over a short period of time can be concerning to lenders. This is often known as “shopping around for credit” and its impact on credit scores often catches people unawares. That’s because multiple hard enquiries may add up to numerous new accounts, even if you don’t sign up. Looking like you’re opening various new credit accounts over a short period of time could suggest you’re under credit stress, having trouble paying bills or are at risk of overspending. As a result, hard enquiries have a temporary, negative effect on your credit score.
Credit enquiries are part of the information lenders may use and can have an impact on whether a lender accepts your application or not. So regardless of whether the application is accepted or rejected, the enquiry may be recorded on your credit report and be affecting your credit score. Even though some lenders may look past your credit score, and offer to approve you for credit, it is likely that it will be very limited and you will not get offered the best deals, and are certain to face increased interest rates to cover the lender’s risk, costing you more money. For this reason, it’s a good idea to avoid shopping around for credit. Soft enquiries aren’t linked to a specific application for new credit and therefore will have no effect on your credit score.
Frequently Asked Questions
Can I really become debt free?
Our experienced team have been helping Australians get out of debt for over 10 years. No matter your unique situation, we have a solution to help you achieve a debt free life.
How can Fix Bad Credit help me with my debt?
Fix Bad Credit’s mission is to help you take control of your debt and achieve financial freedom. We will undertake a free confidential assessment of your current finances, taking the time to fully understand your unique financial situation to tailor the best debt solution options to meet your needs. We provide you with as much information as possible upfront, so you can make an informed and confident decision about the debt solution that’s best for your particular circumstances and budget. We then deal directly with your creditors, you only deal with the same friendly credit and debt solution expert that you have since day 1. We take care of the pain, so you can get on with living.
Does it cost to check my credit score?
No, you can request a free copy of your personal credit report online from the three Credit Reporting Agencies.
- Equifax (previously known as Veda).
- Experian Australia
- Illion (formerly trading as Dun & Bradstreet Australia)
Alternatively, you can contact us, and we can order your credit reports on your behalf, at no cost.