Can Shopping Around for Credit Harm your Credit Score?
3 minute read
Recent research has revealed that two thirds (61%) of loan providers currently undertake needless credit checks when asked for quotes by consumers. These unnecessary checks can be directly damaging to the credit reports of prospective borrowers who are simply searching for the best possible available rate. Even more damningly, 40% of these penalised consumers are entirely unaware that their research could result in a damaged credit score.
These revelations paint a very troubling picture of this corner of the finance market indeed, presenting unscrupulous lenders as underhand as they attempt to corner consumers into using their financial products by threatening their ability to access credit from other sources with a tarnished record. When loan providers generate a quote for an interested consumer, they can perform either a soft search to determine their suitability for a product, or a hard search. A soft search has no effect on a consumer’s credit report, but a hard search will appear on their record, potentially damaging their credit score and ability to access finance in future. Currently the majority of loan companies are undertaking unnecessary hard searches, often in a calculated bid to “trap” consumers into using their product.
But this is not the only underhand strategy being used by the less scrupulous end of the personal finance industry. Many providers thrive by failing to provide their customers with the information, facts and figures they need up front. For example, 39% of consumers who took out a loan in the past 5 years do not know whether or not they were offered a repayment holiday facility. Meanwhile, 10% of consumers using a personal loan feel their provider was not clear about interest rates and many others claimed to have no knowledge about protocol if they chose to repay their loan early or made overpayments. Further complaints from consumers stem from the fact that there is no opportunity to switch loan providers during a loan term in order to access a better deal.
The big picture
Clearly there is a troubling lack of responsibility being taken by many loan providers in the industry. Underhand tactics like unnecessary hard searches which could damage credit reports reveal these companies to be at worst deliberately malign, while the lack of information available to customers show them to be irresponsible at best. Surely something has to give! Searching for personal finance which is clean, plain, simple and will not harm your credit report? Our team can help guide you to the best providers in the industry, helping you to avoid the potential pitfalls and find a solution which suits you. Get in touch today on 0800 114 3978 for expert support.