Credit checks may seem harmless, but too many credit checks can affect your credit score. For more information on improving your credit score, please see our article on how to rebuild your credit score after insolvency. This article explains whether credit checks affect your credit score or not.
What is credit scoring?
Credit Scoring is a number or score that measures what lenders believe to be your actual creditworthiness. Each lender is different and will measure against information they think is important to a particular application. Things you’ll be measured against include:
- Employment Status (Employed being better than Unemployed)
- Salary (High being better than Low)
- Electoral Roll (Being on it is better than not being)
- Missed payments (A history of missed repayments reduces your score)
- CCJ’s (Having them hurts your credit score)
- Other applications for finance e.g. loans and credit cards (Being turned down by other finance providers goes against you)
A company will gather this information they need to credit score you from the information you provide and the information provided by the Credit Reference Agencies.
To ensure the credit score you are given is the right one make sure the information you give is accurate e.g. current and previous addresses, and the information you have on the credit file held on you by the Credit Reference Agencies is correct and accurate. Having the wrong information may mean you either can’t get the finance you wanted or you pay too much for it.
Do credit checks affect your credit score?
Doing too many credit checks in a short amount of time can affect your credit score. This is because companies will think you are in some sort of financial trouble. Hard credit checks, those which involve a complete search of your credit report will hurt your credit score the most (read article on credit checks: what do they check). This is because they signal to lenders that you are high risk and they stay on your credit report for 12 months (some may last longer).
We suggest you take a look at this article on how to improve your credit rating.