With lenders becoming more strict over who they give money to, it’s been pretty tough applying for credit in the last year or so.
That is reflected in a new survey showing that over 5% of us have been rejected for a mortgage or loan application since the beginning of 2007, with 13% of us making at least four applications before we were successful!
The survey was carried out by GE Money Home Lending also suggested that a further 1% of us who were rejected, had to apply for a mortgage or loan at least 8 times before we were accepted.
Because of the trend of tightening lending criteria due to the credit crunch, many people with healthy credit scores are being classed as ‘higher risk’; this means that many of us were finding it more difficult to secure the credit they needed.
Nearly 30% of us gave up after being rejected the first time, but a further 12% of us went on to make multiple applications with no success.
- Multiple applications are risky
The risk with making multiple credit applications is that it could increase your risk of being turned down, as failed applications could be logged on your credit report and count against you.
Mark Maguire, spokesman for GE Money Home Lending, said multiple failed applications can be time consuming and detrimental to a borrower, saying:
"As lenders continue to amend the profile of the borrowers they seek to attract by changing their acceptance criteria, it is a good idea to seek help from an adviser.”
In recent months, some lenders who traditionally offered better rates through advisers to attract more business stopped doing so, making it more attractive to make an application direct to the lender. However, the trend appears to be reversing once again with better rates once more appearing through advisers, as Maguire pointed out:
"Independent advice remains invaluable as it still remains very difficult to navigate the market and get an acceptance for a loan.”
He also added that it was important to check your credit record to make sure you don't have any errors, or dispose of the half dozen credit cards lying unused in your bottom drawer. Something like that could be the difference between a yes and being declined.
Historically it is the number of searches that is most damaging to your credit file but the higher frequency of searches from firms like mobile phone companies means the key issue now is how recent the latest search was, and not the number of searches.