Searches - What's the problem?

a4a

Hello,

I was just wondering why searches are such a problem and cause your credit score to go down? Surely if you are a responsible borrower it makes sense to shop around. Who goes shopping and only visits one shop?

They say too many searches makes you look desperate, or something similar. Surely, that is ridiculous, especially when it can be as few as one or two searches over say 6 months, which can have a negative impact.

It seems to me to be an unfair penalty on your credit file and makes it difficult for you to get the best deal.

Any thoughts?

Hazzinho

Numerous credit applications in a short space of time look desperate, even if there are a few credit applications it impacts you short term as lenders don't know if you've got additional lines of credit until a few months later when accounts display on your credit report, searches don't show whether you got accepted so adds the the risk lending short term.

a4a

But they still affect your score even after 2/3 months. If you have more than 2 searches in 6 months, you are considered a higher risk and have a lower score regardless of whether you took additional credit or not.

Surely this is wrong?

The_Boss

a4a wrote: »

But they still affect your score even after 2/3 months. If you have more than 2 searches in 6 months, you are considered a higher risk and have a lower score regardless of whether you took additional credit or not.

Surely this is wrong?

You don't have a credit score (nobody does) so not sure why this is being referred to.

As above, lots of applications in a short time make it look like you are desperate for credit. However it can also be a benefit. Last year and this year I have applied for 3 cards on the same day, been accepted for all three both times and got higher credit limits than I likely would have if I had applied for one every 2 months.

a4a

Its being referred to because it displays on my credit file.

Why does it make someone look desperate, thats what I don't get?

I can understand about the success rate by applying on same day as all 3 cards wouldn't have seen the other 2, which is why you correctly say that if you had applied for one every 2 months you wouldn't have been as successful. This is my query, which I don't get.

fawnsinthegarden

I think you probably care more about those searches than lenders do. People tend to apply for credit because they need it, rather than just for the sheer fun of it. Several applications could indicate the applicant being in financial trouble, or a change in circumstances such as job loss, I think you would agree that would make an applicant a higher risk.

Credit searches appear instantly, so the other lenders would know about the searches, however they cannot see whether an application was approved or declined, nor the amount offered if approved. The reason why The Boss may have had higher limits is that the credit card accounts reporting would not be updated immediately showing the credit limits. If he waited two months the credit card account would be showing and being reported for the lender to see.

The_Boss

a4a wrote: »

Its being referred to because it displays on my credit file.

Why does it make someone look desperate, thats what I don't get?

I can understand about the success rate by applying on same day as all 3 cards wouldn't have seen the other 2, which is why you correctly say that if you had applied for one every 2 months you wouldn't have been as successful. This is my query, which I don't get.

Just because it's referred to on your credit file doesnt make it a credit score.

If you are making several applications it appears that you need credit quite badly, suggesting finance/income problems. The lender would class you as a risk and score your application accordingly.

If I apply and succeed then a credit limit is assigned but would not be reported on credit file for around another month. The subsequent applications would not take into account the limits because they would not know if I had been accepted, let alone any idea of a limit. Whereas if application 2 was two months later this credit limit from application 1 would be considered and taken into account when lender 2 scored my application.

a4a

fawnsinthegarden wrote: »

I think you probably care more about those searches than lenders do. People tend to apply for credit because they need it, rather than just for the sheer fun of it. Several applications could indicate the applicant being in financial trouble, or a change in circumstances such as job loss, I think you would agree that would make an applicant a higher risk.

Credit searches appear instantly, so the other lenders would know about the searches, however they cannot see whether an application was approved or declined, nor the amount offered if approved. The reason why The Boss may have had higher limits is that the credit card accounts reporting would not be updated immediately showing the credit limits. If he waited two months the credit card account would be showing and being reported for the lender to see.

I care about anything that affects my ability to obtain credit and, especially if the information leading to a rejection is misleading. I know for a fact I have been declined credit because of excess searches (and we are not talking dozens, just 2 or 3).

What I don't get and what my post is all about, is the fact that EVERYONE seems to have been converted to the fact that excess credit searches implies a sign of desperation. Yes, of course it could mean this, but it could also mean you are just shopping around or that after your initial application the lender has changed the terms of the offer and you want to apply elsewhere instead.

It could also mean that I want to switch mobile phone suppliers at the end of the term to better deal, the same with my Gas, Electric or Broadband provider, or apply for a 0% BT card, all to reduce my monthly outgoings and none to increase my indebtedness but it seems I would be severally penalised for this, which is wrong.

a4a

The_Boss wrote: »

Just because it's referred to on your credit file doesnt make it a credit score.

If you are making several applications it appears that you need credit quite badly, suggesting finance/income problems. The lender would class you as a risk and score your application accordingly.

If I apply and succeed then a credit limit is assigned but would not be reported on credit file for around another month. The subsequent applications would not take into account the limits because they would not know if I had been accepted, let alone any idea of a limit. Whereas if application 2 was two months later this credit limit from application 1 would be considered and taken into account when lender 2 scored my application.

See my previous post here to see why I don't agree that it makes me look that I need credit badly and/or that I have finance/income problems.

With last paragraph, what if you applied as you say, got granted the credit and obviously a limit but didn't use this limit? Surely this would improve your chance of getting credit but in actual fact it wouldn't because you would be dragged down by the multiple searches.

SuperHan

a4a wrote: »

With last paragraph, what if you applied as you say, got granted the credit and obviously a limit but didn't use this limit? Surely this would improve your chance of getting credit but in actual fact it wouldn't because you would be dragged down by the multiple searches.

Not necessarily true... Your earnings to available income ratio will be considered and if you have too much available credit they will decline on that premise.

Quark999

a4a: I agree with you entirely, and it is something that has also rubbed me the wrong way!

Interestingly, the American FICO score seems to disregard anything within the last 30 days, precisely so that you *can* go rate shopping (see the MyFICO website). I wonder whether this was the result of regulation. If the US lenders don't go bust because of all those "high risk" borrowers that search for credit multiple times within 30 days, surely the UK lenders wouldn't go bankrupt immediately either?

Therefore, I firmly believe that this impact multiple searches have on your "credit score" is not a result of higher risk, but instead vecause it is an indication that you are trying to get a good deal. Of course, lenders can't have that because it would increase competition, and therefore between themselves and the credit rating agencies they have agreed to combat that by hitting everyone that doesn't want to go for the first deal.

They then try to justify this by claiming it indicates a higher risk, at which point they can get away with murder because the system is so opaque.

I firmly believe this is something that needs to be regulated against, as it severely impacts the customer's ability to get the best deal possible - they are frightened into not searching (I am - each search knocks off a whopping 15 points of my Experian score).