How do credit enquiries affect home loan applications?

Too many credit enquiries could impact your credit score and prevent you getting approved for a home loan product.

Each time you apply for credit, the lender will access your credit file to ascertain your creditworthiness.

Your credit file contains your credit history, which includes:

  • Repayment data on credit cards, loan and mortgages;
  • Types of credit you already have;
  • Number of credit enquiries in last 12 months;
  • Default information.

This means that it includes valuable information about you as a borrower and your financial ‘shopping patterns.’

Each time you apply for credit, you leave a credit enquiry on your report. This is the case even if your loan application is unsuccessful.

What information does an enquiry record?

Each consumer credit enquiry stays on your file for five years and includes the following information:

  • Date of enquiry
  • Name of credit provider
  • Credit amount
  • Reason for enquiry (such as credit card, personal loan)
  • Association with the loan (such as principal or guarantor)
  • Reference number

Note that the enquiry does not say if the loan application was successful.

What creates an enquiry?

Applying for any sort of credit creates an enquiry on your credit file. This includes:

  • Mortgages;
  • Car and personal loans;
  • Credit cards;
  • Store finance;
  • Contracts for services (such as utility companies, mobile phone/Internet providers)

What does not create an enquiry?

Financial actions that do not involve credit do not create entries on your credit file. Therefore activities like opening a new bank account, setting up a new debit card, or buying a phone on a prepaid contract would not create an enquiry.

How do enquiries impact your creditworthiness?

When lenders see many enquiries on your credit report – particularly over a short period of time – they become wary. Too many entries suggest that other lenders have reasons for rejecting your application. It may also suggest you are experiencing financial difficulties.

Furthermore, each credit enquiry deducts points from your credit score. This number predicts the risk a credit provider would take in lending to you. The lower your score, the more risk you pose creditors.

Too many enquiries on your credit file will, therefore, negatively impact your credit score. This could prevent you from getting approved for a home loan.

How many enquiries are ‘too many’?

There is no set number to what constitutes ‘too many’ enquiries. Rather, creditors will look at shopping patterns – the type of loan and credit provider a borrower has applied to over a particular period.

For example, someone who takes out payday loans has a high-risk shopping pattern and this will be reflected in their credit score.

Likewise, someone with several credit card applications in a number of months has a riskier shopping pattern than someone with the same number of applications over a period of years.

It’s a good idea to get your finances in order and, if possible, limit new enquiries in the six months prior to making a home loan application.

Should you avoid enquiries completely?

Avoiding enquiries completely will not necessarily help you get your home loan approved. This is because a credit history is important in demonstrating your reliability in paying back loans.

If you have no enquiries, you may only be able to open credit cards with small limits. You may have to build up your credit history before you can apply for a home loan product.

Can you still get a home loan with lots of enquiries?

If your credit history is less than ideal, you may still be approved for a home loan through a specialist lender. In this scenario you would pay a higher interest rate, but you could later refinance to a mainstream lender when your credit file was clear again.


Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started

Related Articles

TESTIMONIALS

What our customers are saying

Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
Read more
Rod
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
Read more
Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
Read more
Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
Read more
Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
Read more
Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
Read more
Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
Read more
Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
Read more
Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
Read more
Stephen Broomfield
December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
Read more
Tarek Hussain
December 6, 2023
Can't thank Amy enough for her hard work, dedication and determination on getting multiple loans completed for me. I wouldn't hesitate in recommending Amy and the Uno team to any of my associates. Will definitely be back in the near future!
Read more
Linda
November 3, 2023
If you’re looking for a trustworthy, thorough, reliable & knowledgeable Mortgage Broker then you must call Anita Callaghan! I can’t even imagine how stressful this process would’ve been without her. Anita went above and beyond to make sure she answered every question, responded to every text (even on weekends/after hours), and followed up on every detail to ensure we had all the info we needed. Anita is a true people person who is warm, empathetic, kind and supportive. You can tell she loves helping people and loves what she does, which is probably why she’s so good at it! Can’t thank you enough Anita, or recommend you more highly! You’re the best!
Read more