Can Financial Websites Damage Your Credit?

According to one academic, using financial websites can harm your credit rating. We take a different view here at the Fool!

In research carried out for Moneyexpert, Professor Merlin Stone of Bristol Business School warns that frequent use of financial-comparison websites can damage your credit rating.

I'm reluctant to argue with Professor Stone, as someone who is undoubtedly an expert in his field, but I don't entirely concur with the press coverage of this issue. Although I think that this is an interesting piece of research, there is more to it than meets the eye, of course!

The learned Professor is quite right when he states that repeatedly applying for credit can damage your credit rating. What's more, whether an application for credit is accepted or rejected, each leaves a 'footprint' on your credit files. Naturally, if too many of these markers build up, lenders may suspect that your finances are in a desperate way, plus they're always on alert for signs of fraud.

Hence, lenders can (and do) err on the side of caution by rejecting applications from overly enthusiastic borrowers. Indeed, according to Professor Stone, 3½ million people who applied for financial products via comparison websites had their applications rejected in the past year. So, remember this: too many applications over a short period of time can harm your creditworthiness!

Professor Stone also makes the point that comparison websites are a major source of business for financial firms, selling 13.6 million products in the past year alone. Then again, many financial-comparison websites and search engines simply act as tools to make comparing and applying for credit products easier. These search wizards may do the groundwork which helps us to identify cheap credit, but it's up to each of us as consumers to decide whether we actually 'push the button' by applying for one deal or another!

Hence, although Professor Stone's report takes financial websites to task, the underlying problem is that we Brits have gone on the biggest borrowing binge in history, eagerly supported by banks and other lenders keen to give us as much easy credit as we can spend. To me, it's our growing reliance on credit, together with recent moves by banks to tighten up their lending procedures, which are at the heart of this issue. Indeed, with or without the help of financial websites, about one in six adults (eight million people) are routinely turned down for mainstream credit!

If you're worried about your credit report and would like to view exactly what lenders and other organisations can see, then you can ask the three credit reference agencies (Callcredit, Experian and Equifax) for a copy of your file. Alternatively, read What To Do If You Can't Get Credit and then grab a free thirty-day trial of CreditExpert from Experian.

Here at The Motley Fool, we have even more to offer. For example, we can hold up our award-winning discussion boards as an example of the best that the Web has to offer: a huge community of individuals working together to help each other in all fields of life.

What's more, our Editorial team is passionate about helping the public to make better financial decisions. Here are some examples of our writing from recent weeks:

In summary, I'm sure you'll agree that The Motley Fool is far more than just a run-of-the mill financial-comparison website. If not, you can tell us why here!

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