Government inquiry into "shopping around for credit"

Posted in 'Personal Finance' by Barry Stamp

25 September 2009

Fears that “shopping around for the best loans and credit card deals” can damage credit ratings have now resulted in an official inquiry being launched.

On 22 September, the Treasury Select Committee announced that there will be an inquiry into the effect of multiple searches on credit scores and how lenders are recording searches at credit reference agencies when dealing with casual enquiries for credit.

In theory, lenders are meant to leave an ‘enquiry’ search footprint on credit files when consumers are shopping around for cheaper credit. Enquiry search footprints have no impact on credit scores and are generally disregarded. On the other hand, ‘credit application’ searches are the real deal and affect both credit scores and the ability to get credit. There are heavy suspicions that many lenders leave credit application searches when they should only be leaving the much less damaging ‘enquiry’ search footprints.

Some argue that lenders always perform a full credit application search as it discourages people from shopping around, some say that not all lenders have the ability to make ‘enquiry’ searches, and others believe that consumers are not direct enough when shopping around for credit to insist that only an enquiry search footprint is left.

There is a very simple solution that we shall be submitting to the inquiry. If you use our free Credit Score service, this will automatically work out which lenders are likely to say yes to your application for credit, and will present a list so you can work out which is cheapest. And the beauty of it all is that no footprint is left on your credit file.

Use our Free Credit Score service to find cheaper lenders now.