The main reason you have a credit report is so that lenders can look at this information (with your permission) when they need to make a decision on whether or not to lend to you.
Lenders will use your credit report to assess the level of risk they’re taking on when they lend to you. They’ll look at things such as if you’ve paid back your debts in the past, how you’ve paid it back (e.g. on time or late) and how much debt you currently have. Lenders will look at your credit score too, but since this is only giving an indication of what’s in your credit report, they won’t use your credit score alone to make a lending decision.
It won’t always be lenders that want to look at your credit report. Sometimes other types of companies may ask your permission to check your report, such as a potential employer or landlord, if they want to see how well you handle your finances. Debt collection agencies may also check your credit report if they’re trying to find out more information about you.
We’re going to talk about the checks that lenders and other companies carry out on your credit report and which of these might affect your credit score.
Enquiries, also known as credit checks, are when someone looks at your credit report to find out about your borrowing history. In South Africa, lenders and institutions generally conduct one type of search, i.e. the hard enquiry.
An enquiry is when a lender takes a full look at your credit report (and score). This type of credit check leaves a mark on your credit report, so whenever prospective lenders look at your credit report they can see you applied for credit (and whether you were accepted).
Most enquiries stay on your report for 12 months (though a debt collection is visible for a period of 2 years).
These are the common reasons someone may carry out an enquiry on your report:
- When you apply for a loan, a credit card or a home loan
- When you open a new utility account (including mobile phone contracts). It’s very common for an enquiry to have an impact on your credit score – but as long as you keep borrowing responsibly then this impact should only be short term.
If you make several applications for credit in a short period of time, this may have an even greater impact on your credit score. This is because having several hard enquiries carried out in quick succession may appear to anyone looking at your credit report that you’re desperate for credit, or that you’re suddenly struggling with your current debt.
Even though this may not be the case in reality, this makes you appear to be a riskier person to lend to. Not only is this likely to impact your credit score, but it may also mean you’re rejected for credit or you’re only offered credit at a higher interest rate.
Frustratingly, you often won’t know the exact interest rate or credit limit you’ll be offered until you’ve had an enquiry carried out on your credit report. This isn’t helpful if you’re trying to avoid making multiple credit applications.
No. When ClearScore pulls the credit report from Experian, we conduct an “invisible” search, i.e. it leaves no footprint on your credit report and does not impact your credit score. You can log into your ClearScore as many times as you like, with no impact on your credit score, ever.
Your credit report will always show when someone has checked your report.
You find this on yourin the 'Enquiries' section of your report.
Checking over your enquiry history may be helpful if you’re wanting to carefully plan any credit applications. This will help you avoid applying multiple times in a short period (which could negatively affect your credit score). Checking your enquiry history can also help you identify early signs of identity fraud in the event that someone is trying to take out credit in your name.