Having a lot of short-term loans can often negatively impact your credit rating. But, is the same true long-term loans such as a bond for a house? The big question is; Will applying for multiple bond applications impact your credit rating? This question seems to be spoken about by many South Africans. We all fear that our credit rating will be attacked or payments going up if successful. We also tend to apply for a personal loan at our current banks thinking our credit score is at risk if we apply for a bond elsewhere. This raises some concerns if you are simply comparing prices in order to get the best deals with the best conditions. Let’s take a look at the various conditions of loan applications in South Africa.
With loan applications, when you apply for a loan, it gets recorded on your credit profile and is know as “footprinting”. Footprinting allows credit providers to assess you. They will use the information to make a decision on whether to decline or accept your loan applications.
David Coleman, the head of Analytics at Experian South Africa says a multitude of factors are considered when vetting credit applications. A demand for a certain type of credit may set off alarm bells for lenders. However, this is not the same when considering a home loan, which is a long-term credit. A home loan is different to short-term credit. Nedbank commented that they see multiple bond applications made at the same time as a single inquiry. ” The handful of credit bureau associated with a bond application will have no effect. A consistent trend, however, indicating that a consumer is taking on multiple loans, could influence the outcome of a credit application.
The banks do not see it as a negative if you shop around for a bond. Instead, they have their own in-house processes and conditions. Not all credit bureaus will use the application data in the credit scores. In other words, you could go to as many banks as you like, your risk score with these bureaus will not be impacted. Some credit bureaus do, however, use the application data and, in this instance, your score could actually be impacted positively if you do inquiries at different banks. There is generally a threshold, however, that the bureaus will have. With this, making one to three inquiries would add points to your score, three to five inquiries would leave the score as is, and more than five could deduct points from your credit score.