We all love to know who’s been checking us out. But knowing who’s digging around in your credit report can, quite literally, pay dividends. If you’re applying for any sort of credit, whether a mortgage, loan, credit card or even a mobile phone contract, lenders will check out your credit report. Last year, 20% of applications for credit were declined, according to the Credit Reporting Agency 2017 Banking and Credit Card Survey. So, keeping an eye on your search history and ensuring there aren’t too many searches recorded can help ensure you get accepted for credit and even get you a lower interest rate.
Anyone offering credit or monthly payment terms will want to review your credit file to make lending decisions. Potential landlords or employers may also look at your credit report to see how well you handle your finances. While debt collection agencies will access your report to discover more information about you.
Hard or soft search
There are two types of credit report search: a soft search, or quotation search, is a preliminary credit check used when a lender wants to verify your eligibility for a product or when a company wants to confirm your identity. Your own search of your credit file is also shown as a soft check, but does not affect your credit score. While you will be able to see details of soft checks on your credit report, they are not visible to prospective lenders and will not impact your credit score. Soft checks stay on your credit file for 12 months.
A hard search, or credit application check, is generally carried out when you actually apply for a credit product or service or when you open a new utility account, such as a new mobile phone contract. These checks appear on your credit report for two years and will show prospective lenders when you have applied for credit and whether or not you were accepted. If you have multiple hard checks on your account it can downgrade your credit score and raise a red flag to prospective lenders that you might be in financial dire straits, making you a riskier prospect and possibly subjecting you to higher interest rates.
Keeping an eye on your credit search history
Monitoring your search history is really important. Companies need your consent to carry out a credit report search (this is usually given when you apply to a lender). So any unusual searches could indicate that someone may be fraudulently trying to obtain credit in your name. It is possible to remove search inquiries from your credit file. If you are aware of any unauthorised searches in your history, you can send a letter to the creditor stating that the inquiry was unauthorised and should be removed from your credit report immediately.
Keeping an eye on your credit search history can also help you to plan any credit applications in advance to prevent your credit score taking a nosedive. If you’re planning on shopping around for a good deal on credit, it’s worth asking potential lenders to only conduct a ‘quotation search’ or using a credit eligibility tool, which only use soft checks until you are ready to make an actual application.