Does submitting a loan application affect your credit score?

 

 

It is important that you understand the impact of any loan application, or any type of credit, on your credit report and credit score. Our partners tell you when and how a loan request may appear on your credit report.

You need to understand the difference between an unregistered credit inquiry and a registered credit inquiry

Limiting Credit Checks Will Protect Your Score

 

When you apply for credit, lenders perform a credit check to assess your credit history. There are two types of credit surveys: the unregistered survey and the registered survey.

An unregistered credit check has no impact on your credit score. Businesses generally do this type of investigation when they do not intend to lend money at the time of the credit investigation. For example, a credit card company might conduct an unregistered credit check to offer you a promotion. Such an investigation will allow them to establish how qualified you are for this offer.

A saved credit check has an impact on your credit score and appears in your credit report, which means it is visible to other lenders. Let’s continue with our previous example: if you decide to go ahead with the offer or promotion, the credit card company will most likely conduct a recorded credit investigation before finalizing and approving your request.

Limiting Credit Checks Will Protect Your Score

You need to understand the difference between an unregistered credit inquiry and a registered credit inquiry

 

Performing multiple credit inquiries in a short time could significantly decrease your credit score. Why? Because lenders view this as a credit research activity. They cannot know if you are evaluating the options to find the best rate, or if you intend to follow up on each request. The latter scenario could indicate that you are a subprime borrower, since if you take all of the additional credit and loans that you have requested, your debt ratio will increase.

Why do lenders care about the debt ratio? This ratio represents your debts compared to the money you earn. The higher your debt ratio, the more debt you have. As a general rule, lenders do not wish to legend to a person whose debt ratio is more than 36%, since the risks of default are higher. Learn more about the debt ratio here.

If in doubt, ask what type of credit investigation will be conducted

Unfortunately, not all companies are transparent about the type of credit check they use, or even about their intention to use credit checks. Here are some scenarios where it might be best to check if a saved credit check is being performed:

  • Signing of a new cell phone contract
  • The demand for rental accommodation
  • The signing of a public service contract (including cable)
  • The start of a new job

Are you looking for a loan? Choose a lender who offers you quotes from an unregistered credit check

Are you looking for a loan? Choose a lender who offers you quotes from an unregistered credit check

Some lenders establish a quote through an unregistered survey so that you can assess whether their loan is right for you. Fortunately, our partners offer you online loan quotes based on unsaved credit surveys. You can then find out how much money you could get and how much your payments would be. And you know what’s even better? This will take only a few minutes! If you are satisfied with your submission, a loan specialist will contact you to discuss your loan options. You do not have to accept the loan will only use a registered survey if the offer is right for you and you want to request it. 

One or two recorded credit reports should not have a significant impact on your credit score

After a recorded credit survey, your score could drop by a few points, but should still remain relatively stable (unless several recorded surveys are completed in a short time).

Want to know more about the different factors that affect your credit report? Visit the blog. There you will find explanations of all the things you need to understand about your credit report.

Leave a Reply

Your email address will not be published. Required fields are marked *