Search types and their effect on your credit score

Posted by Neil Greenhill in Credit Reports on 13 January 2017 - Neil is a Senior Credit Analyst at checkmyfile

The effect of a search on your credit score or ability to obtain credit depends on the type of search recorded, how many searches have been recorded and even who is recording them.

There are three main types of search of which the most important are arguably credit application searches (credit searches). Credit searches are generally recorded where there is an application for credit, either a new account, an extension of an existing account or in some instances where an account is renewed (for instance where you upgrade a mobile phone contract).

Credit searches are taken into account when lenders decide an application, however their impact is often overstated. Too few Credit searches can indicate that you are not credit active, whereas too many in a short period of time can indicate desperation for credit. Different lenders will place a different emphasis on the number of searches on your credit file when they assess your credit applications.

In terms of your credit score, the optimum number of searches is around 10 per year – however we would never recommend that you apply for credit that you neither want nor need simply to increase the number of searches on your report.

Enquiries are generally recorded by existing lenders when checking a product is still suitable and by prospective lenders prior to an application where a “soft search” is offered by the lender. Solicitors and some lenders may use Enquiry searches as part of statutory money laundering checks which they may have to conduct, please be assured these are normally routine and don’t indicate you are suspected of money laundering.

Enquiries can also relate to tenancy and employment checks. In general these searches are not taken into account when your credit applications are decided, however the exception is where a search has been made by a debt collector. A lender may decline to assist you on the basis of an enquiry recorded by a debt collector.

Audit entries are recorded for all other accesses of your credit file, for instance when checking your credit report yourself. These entries are not even seen by prospective lenders and have no impact on your credit score or ability to obtain credit.

Most of the time the searches recorded on your credit file will reflect your own credit activity, whether that is an application for credit, a tenancy or job or an ongoing credit agreement you already have. Some however may take you by surprise, for instance where a debt collector has run an enquiry to try and locate an individual which owes an outstanding debt. Another common situation where searches may be unexpected is where an online comparison site has been used to look for a credit product such as a car insurance. Often a large number of enquiries (and sometimes audits) will have been created where such a service is used because a number of credit providers are checked at once. Further some online comparison sites will rerun the searches on the anniversary of your use of their site (so they can send further personalised promotional material when you are next expected to renew). If you contact the comparison site that you previously used you can request the removal of your consent for any further searches of this type to be carried out, which will prevent these ongoing audits and enquiries from appearing on your credit file.

If a credit search is entirely unexpected, we would recommend that you contact the lender directly for information on why the search has been run. It is important to regularly check your credit searches to ensure you recognise them – this can help alert you to any potentially fraudulent activity.

Finally, it is worth noting how long the various forms of search can remain on your credit file. Credit application searches will drop off your credit file after different lengths of time with each agency. Typically Callcredit, Equifax and Crediva retain searches for 2 years, while Experian reports searches for 1 year. It is entirely up to the individual credit reference agencies as to how long these searches are retained on their records. Enquiries typically remain on your file for 1-2 years, except those made by debt collectors, which remain for 6 years.

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