Could Comparison Shopping Damage Your Credit Score?
Adelaide mortgage broker Dom Cassisi writes about how comparison shopping could impact your ability to get finance.
“Shopping” is all about looking for the best deal. You do it to find food items your family needs. You shop to choose clothing that suits your style and budget. And for the most part, it’s okay to check out the goods in one store and leave them for those in another business.
But when you’re “shopping” for finance, you need to be a lot more cautious.
Shopping For A Loan
Comparison shopping could actually work against you when it comes to finding the right loan or mortgage.
Let’s be clear on one thing: shopping around for a loan is smart and working with an experienced broker is crucial. Lot’s of banks are vying for your business and it is up to you to be selective.
But you can’t expect to apply at various institutions without facing some consequences.
As nice as it may be to have a back-up plan, lenders don’t see your shopping as a good sign of your creditworthiness. Banks will conclude that you’re shopping around because you keep getting turned down. This implies that you’re a high-risk borrower.
You might be considering a particular lender because they are offering a really good rate. But what you don’t see is the fact that they are only holding out those rates for individuals with a credit background that may be much better than your own.
As a plan B, you decide to apply to one or two less desirable offers.
But you may wind up paying for this tactic by having all your applications declined – including future ones.
Some sneaky online lenders snag unwary would-be borrowers with offers of making an inquiry into your qualifications. You might think it’s not a big deal since you’re not submitting any paperwork. But those inquiries can often go through as applications. Lenders will see that attempt on your credit record and may decide not to lend to you because of it.
The Importance Of Your Credit Score
Your credit score is the main thing any bank will look at to determine whether you qualify for a loan. It’s important to keep your credit score looking clean so that it depicts you as a responsible borrower.
So while shopping around for the best loan is a good idea, be very careful that you don’t apply too hastily.
What if you have recently applied (intentionally or otherwise) to a few lending institutions?
Fortunately, comparison shopping doesn’t stay on your record for long. Just give it a few months, don’t “shop” around like that anymore, and your credit score will be back up to par.
Need advice about your credit score or help finding the best loan deal, the right way? Contact our team here at Funding Options.
– Dom Cassisi, Managing Director