MPs hear of credit search damage

28/10/2009

MPs have heard of the damaging effects of credit record searches on applicants' ability to get low-rate cards and loans.

Representatives of financial websites pointed out that banks' reviews of the credit files, which occur when a customer applies for credit, can damage their overall ratings.

This is because the searches leave a mark on the record - and multiple searches for multiple applications can signal financial distress on the part of the borrower.

However, another reason for making many applications is because the customer is shopping around for the best deal.

Toby Van der Meer, of Moneysupermarket.com, was quoted by the BBC as saying: "Our concern is that people do not apply because of the uncertainty of the system."

However, Eric Leenders at the British Bankers' Association said that the current system allows an "integrity and comprehensiveness" to the applications process.

Being turned down for cheap credit on the high street can cause significant home economy issues among householders.

This is because many turn to unregulated lenders such as loan sharks, leaving themselves with big interest bills and increasing the likelihood that they will need to seek debt help.

Tags; Debt Management and Banking, Credit Card Lifestyle,

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