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Last Updated: Tuesday, 19 September 2006, 15:10 GMT 16:10 UK
Websites 'may hurt credit scores'
Too many applications can damage your credit rating
People who repeatedly use financial comparison websites may inadvertently damage their credit rating, a report has said.

Comparison websites have sold 13.6 million products in the past year.

But the report, by Professor Merlin Stone of Bristol Business School, says numerous applications lead to checks that can lower the credit rating.

This can happen regardless of whether the application is successful or is turned down.

"Many people apply for products they will not be approved for and are left with applications on their credit scores," said Professor Stone.

His report was commissioned by the Moneyexpert comparison site.

Both this and a similar service offer help to potential customers so they can check their existing credit scores before they apply for a loan.


If you have too many of these applications on your file in a short period of time, a lot of the ratings systems... will probably downgrade your credit rating
Neil Munro, Equifax

Professor Stone argues that the problem lies with the fact that some comparison websites assume all potential customers are the same and have good credit histories.

If someone eventually applies for a product such as a mortgage or credit card, the lender checks their credit history.

This enquiry is logged and thus leaves a "footprint" on the files kept by credit scoring companies such as Experian and Equifax.

Equifax's spokesman Neil Munro said: "These footprints are used by future lenders as an indication of your credit-worthiness.

"So if you have too many of these applications on your file in a short period of time, a lot of the ratings systems the lenders will use will probably downgrade your credit rating.

"A large number of applications over a short period of time is statistically quite predictive of somebody's credit worthiness."

According to Moneyexpert, about 3.5 million people had applications for financial products rejected in the past year after being channelled through comparison sites.

This process can develop into a spiral, with failed applicants trying again and again to buy polices or products they have no hope of getting, but simply leaving themselves with a worse credit score each time.

Credit histories

What many people fail to realise is that it is not just events such as failed mortgage or credit card repayments, or county court judgements for debt, that can damage a credit score.

People with healthy finances can have a poor score if, for instance, they have been in a job for a short time, are not on the electoral roll, or do not have a fixed phone line.

You can have a poor score even if you have never borrowed money before simply because you have no identifiable borrowing history.

The use of comparison web sites has grown rapidly over the last few years and is still continuing to grow.

The most popular products bought were car insurance, travel insurance and home insurance.

Credit cards, personal loans and mortgages were the next most popular items.

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