Savvy borrowers being hit by repeated credit searches

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Savvy borrowers being hit by repeated credit searches

Mon, 02 Nov 2009

Consumers are being hit with higher rates on loans as lenders 'penalise' them for shopping around for the best deal, it has been claimed.

Coming soon after the cross-party Treasury Committee met with personal finance experts to discuss the issue of credit ratings, one analyst has revealed that borrowers' credit ratings are being adversely affected by the lenders bringing up their credit reference files .

Given that multiple searches can damage people's ratings, those that make enquiries about different deals can find themselves paying over-the-odds for a personal loan or a credit card, Motley Fool director David Kuo has explained.

"People who are looking for good deals out there are being penalised by the lenders because they dare to look somewhere else for a better deal," he said.

"It is almost like penalising somebody for browsing round the shops and charging them a higher price when they do come back to you afterwards."

At the same time, the Information Commissioner's Office (ICO) has called on lenders to only carry out credit searches when a consumer has actually applied for credit, rather than when they make an informal enquiry, so as to enable them to benefit from the best possible rates.