Can I apply for more than one loan at a time?

Can I apply for more than one loan at a time?

Whilst it's possible to apply for several loans from different companies at the same time, there's a good chance it will ruin your credit score and your chances of getting a credit in the future.

Sometimes it's tempting to make multiple applications for credit. Some might think that the more applications the more chance of being accepted. Or you may simply be looking to see who will give you the best deal. And there's certainly no limit to the number of applications you can make. You're quite entitled to apply for as much credit as you wish.

But there are consequences for your credit rating when you apply for more than one loan or credit card in a short period of time.

Multiple loan applications can actually make it more difficult for you to obtain credit. This is because whenever you apply for any type of credit the lender will complete a credit check. This is the case if you apply for loans, credit cards or even a mobile phone contract, any applications for finance will result in a credit check.

Why multiple credit applications can be an issue

It's the credit check which can cause you problems. Not in terms of whether the lender will accept the application, but in how lenders will view the number of applications you make. Your credit report records these credit checks, known as hard search.  Each hard search can lower your credit score.

So, if you’ve made many credit applications at once it can significantly reduce your rating. This may make it harder to get credit that requires a good rating like a car on finance or renting a house.

Can multiple applications cause other problems?

Yes. Outside of lowering your rating, each subsequent loan company that does a check will be able to see any earlier applications for finance. However, they won't be able to see if they were successful or not. Nevertheless, the more of these hard searches you have on your record; the more it looks like you’re hurriedly looking for money you don’t have. This suggests you’re not good at managing your finances. 

Because of that, whoever you apply for credit with might think you’re too much of a risk, that they won’t get their money back from you. These hard searches stick around for up to two years, although the impact on your actual credit score will reduce during that time.

How to reduce the hard inquiries on your credit report

It's all very well us saying not to make multiple credit applications but sometimes you need to arrange a loan, even if you might have made other applications recently. However, do try to minimise the number of hard searches which appear on your report. You can do this in a couple of ways.

Don't make speculative applications. This will reduce the number of hard searches on your credit report.

You can also seek out lenders who offer a pre-approval process. These lenders make a soft search before indicating if you're eligible for credit with them. Soft searches don't affect your credit score. But it's important to realise that after a soft search the lender will make an additional hard search once you make an actual application. This will of course appear on your credit report.

The overall advice here is to not make multiple loan or credit applications if you can possibly avoid it. Try to space out your applications for things like loans and credit cards by about six months.

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