Credit Search

Meaning and Definition

A credit search, also known as a credit check or credit inquiry, refers to the process of accessing an individual's credit information from credit reference agencies. Lenders, financial institutions, or other authorized entities conduct credit searches to assess an individual's creditworthiness and make informed lending decisions. Credit searches leave a record on the individual's credit file, indicating that their credit information has been accessed.

Why it is important to know

Understanding credit searches is important because they play a role in determining your creditworthiness and can impact your credit score. Each credit search conducted by a lender or creditor is recorded on your credit file. Multiple credit searches within a short period may be viewed negatively by future lenders, as it could suggest you are actively seeking credit and potentially facing financial difficulties. It is important to be mindful of credit searches and apply for credit selectively to maintain a healthy credit profile.

Example in car finance

When you apply for car finance, the lender will typically conduct a credit search to assess your creditworthiness. They will request your credit report and credit score from one or more credit reference agencies to evaluate your borrowing history, payment patterns, and overall creditworthiness. The credit search conducted by the lender will be recorded on your credit file, indicating that your credit information was accessed. It is important to note that too many credit searches within a short period can have a temporary negative impact on your credit score.