Question
My daughter and her spouse are looking to get a mortgage and recently had a first interview with Lloyds Bank. All went well and they were cleared to borrow more then they required, however they stated they will be seeking a number of offers and options from various lenders and the bank stated this could have a detrimental effect upon their credit rating which is very good at the moment.
Is this just a ploy or does it have any truth?Answer
Although various mis-selling scandals suggest banks have sometimes told half truths to win business, in this instance Lloyds TSB is very likely telling the truth.
When lenders look at your credit report (via an agency such as Experian), one of the things they might consider is how many applications you've made for credit. For example, they might deem someone who's made a lot of credit applications in a short space of time as high risk – the simple interpretation being you are trying to borrow a lot of money.
The key is whether seeking a mortgage offer is deemed to be an application and hence end up appearing as such on your credit report, or just deemed to be a quotation which is likely to leave your credit report unscathed.
In simple terms, asking a lender for the mortgage rate you're likely to pay should be classed as a quotation, hence safe. But asking a lender whether they'll lend you a specific amount of money will likely leave its mark on your credit report, even if it’s only a decision in principle.
My daughter and her spouse are looking to get a mortgage and recently had a first interview with Lloyds Bank. All went well and they were cleared to borrow more then they required, however they stated they will be seeking a number of offers and options from various lenders and the bank stated this could have a detrimental effect upon their credit rating which is very good at the moment.
Is this just a ploy or does it have any truth?Answer
Although various mis-selling scandals suggest banks have sometimes told half truths to win business, in this instance Lloyds TSB is very likely telling the truth.
When lenders look at your credit report (via an agency such as Experian), one of the things they might consider is how many applications you've made for credit. For example, they might deem someone who's made a lot of credit applications in a short space of time as high risk – the simple interpretation being you are trying to borrow a lot of money.
The key is whether seeking a mortgage offer is deemed to be an application and hence end up appearing as such on your credit report, or just deemed to be a quotation which is likely to leave your credit report unscathed.
In simple terms, asking a lender for the mortgage rate you're likely to pay should be classed as a quotation, hence safe. But asking a lender whether they'll lend you a specific amount of money will likely leave its mark on your credit report, even if it’s only a decision in principle.
Read this Q and A at http://www.candidmoney.com/askjustin/916/will-mortgage-offers-hurt-my-credit-rating
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