What is a credit enquiry and how does it affect your ability to obtain credit?

If you make an application for credit, it can be listed on your credit report as a ‘credit enquiry’.

Credit enquiries can have an impact on whether a lender accepts your application or not.


What may be included in a credit enquiry?

  • the date
  • type of credit you have applied for (a personal loan, credit card, mortgage or phone contract)
  • whether you are a sole or joint borrower (including acting as a guarantor for another loan)
  • the amount

What does a credit enquiry involve?

Let’s take a look at a real-life example…

John is buying a new car and he applies for a car loan with XYZ Car Finance.

John completes his application form and as part of the assessment on whether to accept his application, the credit provider conducts a credit enquiry.

As a result of this credit check, John’s application for the car loan will be recorded on his credit report. This is regardless of whether XYZ Car Finance accepts his application or John decides to proceed with the loan.

This credit enquiry will stay on John’s credit report for five years from that date.

Do credit enquiries impact my credit report and score?

The type of credit applied for, the amount of credit and the number of credit enquiries over a period of time can all have an impact on your credit score.

One of the biggest impacts of credit enquiries that often catches people unaware is ‘shopping around for credit’.

If you make a number of credit applications in a short space of time, it can result in a number of credit enquiries being listed on your credit report. This can have a negative impact on your score and the way lenders see you.

Many applications in a short space of time can be a sign of credit stress.

How can you help avoid credit enquiries negatively impacting your credit report and score?

  • Do your homework before you apply – research and compare different credit products before you make any credit application. Seek the advice of your Finance Broker who will research and compare your options for you, normally at no cost, and select the best option so you maximise your chances of success in getting your loan approved.
  • Keep track of your credit commitments – only apply for credit if you really need it and remember that credit includes credit cards, personal loans, interest-free finance and any utilities contracts.

Follow this Link to get your credit report for Free and check what credit enquiries are listed on your file?

At MoneyQuest Eatons Hill we are full service finance and mortgage brokers, providing business finance, franchise lending, commercial and residential property mortgage loans, SMSF loans, and car and equipment finance.

Call us on 0417 551 445 for a no obligation appointment to discuss your specific requirements.

Article credit: This article was originally published at https://www.mycreditfile.com.au/news/what-credit-enquiry/



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