How do credit enquiries affect your score?

2min read
Posted 10 December 21

If you're clicking on this blog, you've probably at least heard of credit enquiries if not, we cover them in detail elsewhere. But, as a quick run down, enquiries are where credit reporters run a check on your credit history before approval for a loan or another finance option. Credit providers can use your credit history to determine your intentions and your likelihood of repayment because credit inquiries are part of the process to approve you for financial activity (such as a loan or new credit card).

Are there any dangers in a credit enquiry?

If you're requesting approvals from many credit reporters or one reporter multiple times, it tells credit lenders that you're in the mood to borrow credit. If you continue to request credit repeatedly, lenders may wonder whether you can afford to pay back what you borrow. Enquires are also recorded on your credit history and drop your score slightly each time, whether or not your request was approved.


So should I take out a credit enquiry?

Of course, you'll have to take out a credit enquiry before getting a new loan or credit card. But the idea behind this is that, while your score will dip slightly, it'll quickly correct itself with good repayment behaviour and low credit utilisation (the amount of credit you used compared with the amount you're allowed to take out).

We suggest that you should only take out a full enquiry on a considered loan, one that you're fully able to pay back. 

So what can I do in the meantime?

Luckily, there are two types of enquiries.

A complete credit application happens when you apply for a loan or credit amount. You can do this online or in-person, and they're straightforward to do (sometimes without even realising). When you show interest in getting credit for anything, you may start an enquiry, which will show that you are looking for money to borrow. This process will affect your score, so it's essential to do your homework before making a credit application.

A quotation enquiry is a little different. This gives you a ballpark figure on your loan but isn't a full enquiry. Which means it doesn't hurt your score (although it is noted down on your credit report). 

Whatever you choose to do, you should always do your homework first before you begin an application. What are the repayment and interest rates? How many other credit products are out there? Have you already got a few payments on the go?

The best way to answer all these questions is to start a budget. We've another blog on the subject to help you get some ideas. 

What gets recorded on a credit enquiry?

Usually, a couple of things, the most obvious being the amount of credit you're applying to get. You'll also likely have to state what its use will be, whether a personal loan, credit card, mortgage or another type of repayment, as well as who else will be recorded on the account.

All this information is weighted differently for your score because some applications differ from others. You should always check with your provider about accessing the risk, as generally, these things change on a case by case basis, making it hard to give an exact figure when it comes to your credit score. 

As a quick side note, we also don't recommend joint accounts with people like flatmates and friends because their actions can affect your credit score. There's no way to tell the difference between you or a mate on an account, so be careful when borrowing.

In short.

In short, a full credit enquiry will cause your score to dip which is normal. Creditors don't particularly want to encourage you to take out lots of loans you can't pay back, and so when you do, it gets noted on your report. 

The good news is that a good credit payment history will quickly grow your score if you don't apply for too many loans. So you can end up with a better score applying for a few credit enquiries and keeping to them, rather than not applying for any at all. That's because you're growing and adding to your credit history with good payment history, which providers want to see.




Info and tools on the Yonda website are used as a guide only and do not constitute financial advice. Use Yonda as a starting point and then seek professional advice.