Credit Scoring - a word of warning! 12/02/09

Author: Jeni Browne Posted on: 12 February 2009

When you want to borrow money, it is very easy to apply for credit and then if you get declined or find a better deal somewhere else, apply again.  However very few people realise the detrimental affect these applications have on their credit rating.  And with a clean credit history and a high credit score being a pre-requisite with most lender institutions these days, you could be doing more harm than you imagine.

I had a client this week who recently found a good deal for a residential mortgage.  They applied for this mortgage and passed credit score, however the property they were buying fell through so their application was closed.  They then found a new property shortly after and applied for another mortgage, and passed credit score.  They then applied for a new credit card with 0% rate for balance transfers.  Fortunately a better mortgage rate became available so they applied for this mortgage.....and were declined.  Although they had a impeccable credit history ,the number of credit searches they had recently had had eroded their credit score to such a extent that they fell outside of credit scoring.

The best advice to avoid this happening to you, is to try to avoid applying for credit needlessly.  If you want to borrow money, shop around for the best mortgage deals, ensure as far as you can that you are eligible for it, and then allow the credit search to happen.  If you are unsure whether you are eligible for  a deal or whether the product you are considering applying for is competitive, do go to a independent adviser who specialises in the given field and let them do the reasearch for you.