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Will Running a Credit Check Affect My Credit Score?


What exactly is a credit check?

Many lenders review a person’s credit score before lending money, and this is essentially a financial background check.

Equifax, TransUnion and Experian are three credit bureaus in the UK that collect detailed information about people who want to borrow money. They seek to record the details of everyone in the country, then lenders who want to review an individual’s status can be accessed before approving their application.

You will find that the credit bureaus most likely already have a record of you and it records the following:

  • Information about your current credit account and any loans you are currently paying off.
  • Details of missed or late payments.
  • Electricity and water bill payment records.
  • The amount you can borrow within your credit line (this is often called your credit utilization ratio).
  • Basic identifying details such as your name and date of birth and whether you appear on the UK electoral register.
  • Your current address and where you previously resided.
  • Information about whether you are linked financially with another person (i.e. a spouse with whom you share a credit card).

Essentially, credit bureaus are tasked with providing these insights to lenders to assist them in making better decisions about who they give money to. The information they accumulate is then aggregated into points, which are calculated in the hundreds.

Unfortunately, each credit bureau scores differently, and they use different credit scoring scales and models, adding to the confusion. But in general, the higher your credit score, the less likely you are to default on your payments. The factors that we introduced above will affect your overall score.

Upon receipt of your loan application, the lender will check your score with at least one of these credit bureaus. They will also conduct some independent checks, but credit history is often the most important factor considered. Contrary to popular belief, there is no universal minimum score you must achieve to be approved for a loan.

Finally, you should note that lending institutions follow different guidelines and have specific requirements, not necessarily requiring a minimum credit score. For example, one might worry about a large balance but not be overly concerned about a few missed payments here and there. Another lender may forgive store cards but may not be willing to lend to people with outstanding credit cards.

What is the difference between hard and soft credit checks?

Lenders may run one of two credit checks when considering your suitability – a soft or hard credit check.

You should know that hard credit checks leave records on your records. This is important because too many hard credit checks in a short period of time can be seen as a sign of financial distress, thus causing lenders to think twice about approving a loan. credit to you.

What is a soft investigation?

Known in the industry as a soft traction, a soft credit investigation is not recorded on your record. These are usually done by lenders looking to conduct basic ID checks or by people themselves looking to find out their credit score.

You can conduct as many soft credit checks as you want without worrying about them appearing on your credit file.

What is a difficult question?

As mentioned, a hard question pops up on your credit file. It happens when:

  • You apply for a loan or mortgage
  • You submit an application with a new credit card company
  • You grab a new mobile phone contract
  • You sign up for a new utility company

You should keep your credit score in mind when applying for these forms of credit, as you don’t want too many difficult questions on your application.

However, fear not! A few apps here and there are unlikely to negatively affect your credit score. In fact, lenders are most concerned about a series of shortfalls in a short period of time, which essentially makes you seem desperate for credit.

If your credit application is denied, don’t start applying for every loan under the sun. Instead, use a qualified calculator so you can understand your options before taking the next steps. Our guide on what to do when you’re denied a loan should also help.

Is it possible to get a personal loan without affecting my credit score?

Your credit score will be affected when you agree to a personal loan. There’s nothing you can do about this, as acquiring new credit – be it a credit card, personal loan or mortgage – will increase your outstanding debt levels and will affect your credit score. yours in the short term.

Don’t worry about this, as you’ll usually boost your credit score by making regular, on-time payments on your loans. Our detailed guide provides more information on this topic: does a personal loan affect your credit score and does a debt consolidation loan affect your credit score?

Even in the inevitable circumstances that affect your credit score, you should still take steps to make sure you don’t damage your credit score.

Therefore, it is important to avoid unnecessarily difficult credit checks and faulty applications. We recommend that you take a moment to consider your current circumstances. You can check your credit file for free at each credit bureau, which is useful for the following reasons:

  1. You will know how good your credit score is.
  2. You can check for any issues or errors that may affect you. If you notice any errors, the credit bureau is obligated to correct them as required.

Combine this knowledge with a qualifying calculator, and you can have more insight into the loan you’re likely to get approved for. If your credit score is considered ‘fair’, you can benefit from our guide to detailing the loans that may be available to you.

Another good idea is to reach out to providers whose apps shouldn’t have any effect on your credit score while you’re processing your application. To help you decide if applying is worth the minimal risks involved, your loan provider will let you know if the application will have a negative effect on your score. or not.

Koyo initiates the application by performing a soft credit search to ensure our customers’ scores are not negatively impacted in the first place.

Please note – Koyo and other open bank lenders rely less on credit history when reviewing loan applications. For more details, read our comprehensive guide: Open Banking Explained.

Frequently asked questions about Credit Score

Is checking your credit score regularly a bad thing?

Are you sure. Instead, it makes financial sense to check your credit score every few weeks to track any changes. Your score will not decrease because you check it often. You can also use third-party credit checking who perform regular soft checks on your behalf. But before paying for their services, you will always be able to get free updates from the three main offices.

Why is checking your credit score causing it to drop?

This is a misnomer; Checking your credit score doesn’t affect it. However, sending a large number of loan applications in a short time will make the lender think you are in financial trouble, which means they will be less willing to approve your application.

How many points will you drop after doing an inquiry?

A relatively small number of credit applications will have a negligible impact on your credit score. Conversely, too many applications in a short period of time exposes you to a high risk to financial institutions, so keep this in mind when applying for credit.

Is it possible to check my credit score without negatively affecting it?

As mentioned, checking your own credit score is not a bad thing. It’s also free, and you can check your score by visiting one of the three credit bureaus in person. For example, you can check your Experian credit score for free by clicking here.

Will my credit score be affected by applying for a credit card?

Correct. All types of loan applications affect your credit score. Any time you apply for a credit card, personal or student loan, mortgage, overdraft, car purchase, or any other form of loan for that matter, your credit score takes a hit.

Next step

While the information above is a lot to learn, here is a brief summary:

  • Most loan companies will check your credit history when you apply for a loan.
  • When they check your profile, they leave a record that other lenders can view. Too many loans in a short time will look bad and can affect your success in getting credit.
  • There’s no harm in making a few credit applications, but if you’re not approved, pause and consider your available options (such as a qualifying calculator) instead of continuing. continue with some applications.

Koyo makes the most of Open Banking technology, rather than just information from a credit reference agency. This allows us to make lending decisions based on your actual financial situation rather than what a separate institution says about you. Importantly, your initial application with us will not damage your credit score.

For more information, visit www.koyoloans.com – Representative APR rate is 27%.





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