How to get credit where credit’s due

MORE than half of us put our credit score at risk by not checking eligibility before applying for a loan, mortgage or credit card.

Each time you make an application, a ‘hard search’ is recorded on your credit report and this can affect your credit score – reducing your chances of getting accepted for the best deals in the future.

Almost a quarter of people said they hadn’t done an eligibility check because they didn’t know what the benefits were, and one in five thought it would negatively impact their credit rating, according to research from credit ratings firm Experian.

Eligibility checkers leave a ‘soft search’ on your credit report. They show you financial products you are likely to be accepted for before you apply for them – without affecting your credit score.

Analysis from Experian shows just how important it is to spend an extra few minutes doing one of these checks before putting in an application.

It revealed that one in eight people looking for loans via its comparison website in March had a 0% eligibility rating for all products. That means they had no chance of being accepted for a loan and they risked damaging their credit score if they were to make an application.

James Jones, head of consumer affairs at Experian, said: “Using an eligibility checking service can make a real difference when it comes to getting the best deal.”

WHERE TO DO ELIGIBILITY CHECKS

Experian.co.uk has a comparison service which lets you know which products you are most likely to be accepted for.

John Lewis Finance offers potential borrowers the chance to check their likelihood of being accepted for personal loans with a soft search.

Credit eligibility and comparison website specialist Totallymoney.com offers the Borrowing Power feature, which shows you how likely you are to get the credit you’re looking for – and sorts out the best offers.

Moneysupermarket has a Smart Search tool.

Meanwhile many financial firms, including Barclaycard, MBNA and Asda Money, offer soft searches before you make a formal application for their products.

HOW TO IMPROVE YOUR ELIGIBILITY

Make sure you are on the electoral roll – lenders use this to confirm who you are.

Make sure you make repayments on time each month.

Keep credit card balances below 50% of your limit – the lower your balance the better when seeking more credit.

Try to pay more than just the minimum each month – at least 10%.

Don’t keep applying for credit – several applications in a short period will set alarm bells ringing with lenders that you are struggling financially.

If you haven’t had any credit or very little, you won’t have a credit history that lenders can use to help them decide whether to give you credit. Running a current account or credit card responsibly, staying within limits and not living in the red can boost your report.

MYTHS ABOUT ELIGIBILITY

45% of people aren’t aware that the majority of lenders are signed up to eligibility services.

43% incorrectly think checking eligibility will negatively affect their credit rating.

40% don’t realise they can check their eligibility as many times as they want without it impacting their eligibility.

Using an eligibility checking service first can make a very real difference to getting the best deal