Credit Enquiries on Your Credit File: What You Need to Know
It is important to understand how credit enquiries work so that you can manage your credit score effectively.
Credit enquiries are a record of when a lender has checked your credit report. They can be either hard or soft enquiries.
What is a Credit Enquiry?
A credit enquiry is a record of when a lender has checked your credit report. Lenders check your credit report to see how you have managed your credit in the past, and to assess your risk as a borrower.
There are two types of credit enquiries:
- Hard enquiries are made when you apply for credit, such as a loan or a credit card. Hard enquiries can have a small negative impact on your credit score, because they are a sign that you may be looking for more credit. However, the impact of hard enquiries is usually temporary. They will fall off your credit report after 12 months, and their negative impact will diminish over time.
- Soft enquiries are made when you check your own credit report, or when a lender pre-approves you for credit. Soft enquiries do not have any impact on your credit score. This is because they are not a sign that you are looking for more credit. Instead, they are simply a record of you checking your own credit report.
It is important to understand how credit enquiries work so that you can manage your credit score effectively. If you are planning to apply for credit, you may want to avoid making too many hard enquiries in a short period of time. This could temporarily lower your credit score and make it more difficult to get approved for credit.
You can also dispute any inaccurate or fraudulent credit enquiries. If you see an enquiry on your credit report that you did not make, you can contact the credit reporting agency to have it removed.
Get a free Australian mortgage assessment today.
How Many Credit enquiries is Too Many in Australia?
There is no one-size-fits-all answer to this question, as the number of credit enquiries that is considered “too many” will vary depending on your individual credit profile and the type of credit you are applying for. However, in general, it is advisable to avoid making more than 2-3 hard credit enquiries in a 6-month period.
Hard credit enquiries can have a small negative impact on your credit score, because they are a sign that you may be looking for more credit. However, the impact of hard enquiries is usually temporary. They will fall off your credit report after 12 months, and their negative impact will diminish over time.
If you are planning to apply for a large loan, such as a mortgage, you may want to space out your applications over a period of several months. This will help to minimize the impact of the hard enquiries on your credit score.
You can also check your credit report regularly to see how many hard enquiries you have. If you see that you have a lot of hard enquiries, you may want to consider waiting a few months before applying for new credit.
How Long Do Credit Enquiries Last?
Hard credit enquiries stay on your credit report for 2 years, but their negative impact will generally only last for 12 months. Soft enquiries will only stay on your credit reports for 12-24 months.
The impact of a hard enquiry on your credit score will depend on your overall credit profile. If you have a good credit history, a single hard enquiry is unlikely to have a significant impact on your score. However, if you have a poor credit history, a hard enquiry could have a more noticeable impact.
The Six Month Rule
The six-month rule is a guideline that suggests that you should not apply for more than two or three hard credit enquiries in a six-month period.
- Don’t apply for more than 2 or 3 new credit accounts in 6 months.
- Hard enquiries can lower your credit score a little bit, but the impact goes away after 12 months.
- If you need to apply for a lot of credit in a short time, space out your applications over a few months.
- Check your credit report regularly to make sure it’s accurate.
How Do You Get Credit Enquiries?
Here are some of the things that can trigger a hard enquiry:
- Applying for a new credit card
- Applying for a loan
- Applying for a new cell phone plan
- Applying for a lease
- Opening a new utility account
- Getting pre-approved for a mortgage
Not all hard enquiries will have the same impact on your credit score. For example, a hard enquiry that is related to a new loan or credit card will have a larger impact on your credit score than a hard enquiry that is related to a pre-approval or a utility account.
What Won't Get You An Credit Enquiry?
Here are some things that will not get you a credit enquiry:
- Checking your own credit report.
- Being pre-approved for credit.
- Opening a checking or savings account.
- Renting an apartment.
- Getting a job.
- Being approved for a government benefit.
Note that there are some exceptions to these rules. For example, if you are applying for a very large loan, the lender may do a hard enquiry even if you are pre-approved for the loan. Additionally, some landlords and employers may do a hard enquiry if they are particularly concerned about your credit history.
Are Too Few Credit enquiries a Problem?
Yes, too few credit enquiries can be a problem. Lenders use credit enquiries as a way to assess your creditworthiness. If you have very few credit enquiries, it may look like you have never applied for credit before. This can make lenders think that you are a risky borrower.
There is no set number of credit enquiries that is considered too few. However, if you have applied for fewer than 2 or 3 new credit accounts in the past 2 years, you may want to consider applying for more credit to increase your credit score.
Tips for Getting Approved for a Home Loan With Enquiries
Getting a home loan with enquiries can be challenging, but it is possible. Here are some things you can do to improve your chances of getting approved:
- Space out your applications. Lenders will look at how many credit enquiries you have in the past 6 months. If you have too many enquiries, it may look like you are desperate for credit, which can make lenders think you are a risky borrower. Try to space out your applications for new credit over a period of several months.
- Get pre-approved for a loan. When you get pre-approved for a loan, the lender will check your credit report, but this will not count as a hard enquiry. This will give you an idea of how much you can borrow and what your interest rate will be.
- Have a good credit score. A good credit score will make you look more attractive to lenders. You can improve your credit score by paying your bills on time, keeping your credit utilization low, and avoiding opening new accounts too often.
- Have a down payment. Having a down payment will show lenders that you are serious about buying a home and that you have the financial resources to make the payments. A larger down payment will also give you a lower interest rate.
- Be prepared to answer questions about your finances. Lenders will want to know about your income, expenses, and debt. Be prepared to answer these questions honestly and in detail.
Don’t let a surplus of enquiries hinder your dreams of homeownership. Odin Mortgage specializes in custom solutions for individuals with imperfect credit. We recognize that life’s obstacles can lead to financial setbacks, and we are committed to ensuring that everyone has a chance to own a home.
Get a free Australian mortgage assessment today.
Frequently asked questions
What is a credit enquiry on a credit report?
A credit enquiry on a credit report refers to a record of when a lender or creditor requests to view your credit information. It occurs when you apply for credit, such as a loan or credit card, and the lender reviews your credit history to assess your creditworthiness.
Do credit enquiries affect your credit score in Australia?
Yes, credit enquiries can have an impact on your credit score in Australia. When a lender or creditor performs a credit check, it is recorded as a “hard enquiry” on your credit file. Multiple hard enquiries within a short period of time can lower your credit score temporarily.
See What You Qualify For
Featured In
