The Dangers Of Applying For Too Much Credit
In this day and age of online comparison sites and a wealth of options when it comes to applying for credit, it's tempting to fill in multiple applications in the hope of getting the best deal available, or even just to maximise your chances of having an application approved.
This is especially true if you have a less than perfect credit rating - back in the old days of filling out lengthy forms, sending them off by post, and waiting for a reply, applying for credit cards and so on could be a real chore if you just kept getting rejected. The ease of applying online nowadays means you might think it a good idea to apply for multiple products at once, seeing which ones are prepared to accept your application, and then choosing the best offer.
This could very well be a mistake, especially if your credit rating is already impaired.
Your Credit File
Your credit file is a record of all the major financial events in your life, from being approved for finance, to making repayments. Most people know that missing a payment, defaulting on a debt, or any other form of financial misdemeanour will be recorded on your file and will make it more difficult to obtain credit in the future.
What is perhaps less well known is that every application you make for credit is also recorded on your file, whether successful or not, and this can have consequences.
If your file shows a large amount of applications, this could be taken as a sign that you're desperate for credit from any source and that your underlying finances are in less than perfect shape. This could obviously raise flags in a lender's mind and make them less willing to approve your application. Obviously, this is even more the case if you have a high number of unsuccessful applications recorded over a very short period.
What Can Be Done?
The first and most basic tactic is to carefully look at the published acceptance criteria for a product before you apply, and if you are in any doubt about whether you qualify, pass over it. If you have had money problems in the recent past, there's probably little point in trying to get one of the 'best buy' credit cards with the best offers - you'll need to set your sights a bit lower. Maybe a credit card specifically aimed at people with bad credit could be an answer, or even one of a mainstream bank's standard cards rather than a gold or platinum one.
One other option to look out for is something called a quotation search or soft search. This is not offered by all lenders, but it differs from a normal credit check in that it leaves no trace on your credit file. If you can find a lender offering this facility, you will enter your details as normal, then after a quotation search, you will be shown an example of the kind of offer you can reasonably expect to be given. If you decide to go forward with your chosen offer, a full credit search will then be carried out to finalise your application.
A successful quotation search will not guarantee that your full application will be accepted, especially if you have serious black marks like CCJs on your file, but it will give a good indication if you're the general type of customer a bank wants based on your income, employment history and so on, and will cut down on the number of fruitless full credit checks recorded against you.