Loan inquiries from several banks – can this affect creditworthiness?
Creditworthiness and lending
These two factors influence each other. If the creditworthiness is low, a loan is either granted on unfavorable terms or not at all. Therefore, consumers who compare loans and want to make inquiries with several banks should first ask private credit bureau for a self-assessment in order to be up to date with their data.
Credit comparison yes, but be careful with credit inquiries!
Today there are numerous loan offers of various types from direct banks on the Internet as well as from branch banks and large banks with online subsidiaries. A comparison of conditions is advisable. When some banks are shortlisted, you want to know whether a loan application could also have a chance of success and make a loan request to the banks in question.
The banks, in turn, first make an inquiry to private credit bureau for a credit check. The inquiries then add up there. Whether these inquiries are saved permanently, are visible to other banks and have a negative impact on the score depends very much on how the respective inquiry was formulated by the banks.
It all comes down to the right request
A loan request from several banks does not necessarily have to result in poor creditworthiness if the resulting request is made correctly by private credit bureau. In order to protect the consumer from unjustified private credit bureau entries, there have been two request options in practice since 2006:
- Request credit
- Request credit terms (or request mortgage terms for real estate financing)
If an “Credit request” is explicitly made, this request will be saved at private credit bureau for one year, even if the loan was not obtained at all. This entry is visible to other banks for 10 days. The more credit inquiries were made, the more skeptical are the banks that also make a private credit bureau request. Since no credit agreement was concluded with the other banks, they rate the entries as a rejection due to a lack of creditworthiness. The score deteriorates continuously.
On the other hand, the situation is different when an “inquiry loan terms” is made. There is only a note that a request has been made regarding the loan terms for a possible borrowing. However, this entry remains invisible to other banks that also make a request and also has no negative impact on the score.
So a little extra word makes a big difference. But how can the consumer who makes a “loan request” at the bank influence the fact that the request for private credit bureau is correctly formulated? This is more difficult for direct banks than in the branch bank with the credit advisor, who is specifically pointed out again.
Consumers shouldn’t be rushed to get a loan request from several banks at the same time if they are online credit institutions and banks, even if it works quickly and easily. It is important to read the fine print to find out which request option the bank chooses. If this is not noted or recognizable, a follow-up via telephone, email or chat is advisable.