An enquiry, or a credit check, is when someone looks up your borrowing history. Remember that whenever you open a new credit account, there may be an enquiry done and this will affect your credit score. Even if you are just shopping around for different credit opportunities, but never end up going with any of them, a hard enquiry could still be done.
Why does an enquiry negatively affect my credit score?
When you make multiple credit applications within a short space of time, this will affect your credit score. The reason is that every time you apply for a new line of credit, a hard enquiry is done. Several hard enquiries can give the impression that you are desperate for credit opportunities or that you are having problems managing existing debt.
This may not be the case, but unfortunately it makes you a riskier person to lend to. Once you have access to credit, you should try to limit the number of credit accounts that you have and rather make the ones that you have, work for you. Make sure that you make your payments on time and your credit score will improve in no time!
What if I am not financially strained, but I would like to take out credit to better myself?
There are certainly good reasons for taking out credit, such as: you want to finance yours or your children’s education, you need help buying a home for your growing family or you need to grow your dream business.
However, taking out multiple forms of credit at once can be rather dangerous. You may argue that you want to get more money, or even use a new loan to pay off an existing loan, but you need to remember that you will need to pay all of them on time, with interest, fees and principal. It is very easy to Get bogged down by your multiple loan repayments.
If you need to take out a personal loan, you can apply for one here, but then make sure that you pay it off, instead of applying for multiple personal loans. Let your good payment history on the loan help to boost your credit score.