Applying for a credit card, home improvement loan, or will generally include a credit check so that the lender can assess your creditworthiness and any risks associated with lending to you. These searches, known as a hard check, will leave a mark on your credit file, so it’s sensible not to submit too many credit applications at once, but this doesn’t mean you can’t shop around.
What is a credit application?
A credit application is when you apply for any form of credit, such as:
Your potential bank or lender will ask for your consent to run a credit check as part of the application process.
When should you apply?
Before you apply for any type of credit, it’s good to check your credit file to ensure that all the information is accurate, up to date, and free of errors. Some of the mistakes that you need to look out for are:
Missed payments on your credit accounts
Wrong addresses linked to your name
Credit applications you haven’t made
Payments that aren’t recorded
Debts that are already paid yet inaccurately recorded
What information is in my credit record?
Your credit report will contain information about your financial history. This comes from banks, credit card companies and building societies you have borrowed money from in the past or currently owe to. There will also be information from publicly available sources, from your mobile phone provider and others. Your report is likely to have the following information:
- Your name, current address and other personal details
- If you are on the electoral roll at your present address
- Joint financial products you currently hold (such as a current account)
- How much credit you have outstanding
- Missed payments on past or existing accounts
- Late payments on past or existing credit cards or unsecured loans / secured loans
- If you joined an Individual Voluntary Arrangement (IVA)
- County Court Judgements (called “Decrees” in Scotland) filed against you, bankruptcies and home repossessions for six years after they occur
- If you have ever moved away whilst owing money
Why are too many applications bad?
When a lender obtains your credit record, they will review how you handle your finances. Each credit check is recorded on your credit report, whether you get accepted or rejected.
Every credit application you’ve made will be apparent to the next lender or creditor you apply. They can view if you’ve been rejected or approved before.
Lastly, making numerous applications over a short time, it could appear to lenders that you are desperate for a loan or credit, which unfortunately may decrease the likelihood they will lend to you.