After searching the internet for low interest rates on loans, I saw that Northern Rock with 5.8% ARP was much lower than all other providers, so I went into their bank. The young guy behind the desk immediately got the forms out and mentioned that not all customers are offered the 5.8% rate, but instead of being refused, I would then get a higher rate, which could go up to about 9%, but most likely it would be just over 6%. I thought that was fine and couldn't imagine why my credit check would be negative. I just had a mortgage approved, have a secure regular income and no credit card debts. So off he went for the credit check - and came back with an APR of 8.9%!! Apparently the mortgage went against me, because it required a credit check and for every credit check that's done on you, you get a point. The fact that the mortgage was approved, didn't matter. But the scary part was: in the meantime, Northern Rock had done another credit check on me, which meant this worsened my credit rating!
So basically, they get you into the back with advertising 5.8% as a "typical" rate, although it's most likely not the average rate they give to their customers. When they run the check to find out exactly what rate they offer you, another point is added to your credit history, which negatigely affects your credit rating - but they don't tell you that. So when they come back with the actual rate, you can either accept the (sometimes much) higher rate or go to another bank with a worse credit history than when you first walked into Northern Rock.
I am shocked that such behaviour is legal, because this means that you are effectively punished for shopping around for loans. In the end I went to NatWest, where I have my current account with. They had already told me that I can get a loan pretty much instantly and they wouldn't need to run a credit check. So I got a loan with them yesterday afternoon - and the money has gone into my account straight away, no hassle at all.
If you are looking for a loan, I would definitely ask the bank when you apply, whether they have to do a credit check first - and if so, I'd be careful. Now this would sound to me like a trick...
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Credit checks are pretty much standard policy for most financial institutions which is why you're advised not to trawl the high street asking for mortgage or loan quotes in one day because as you get further down the line the banks are likely to wonder whether you will be taking on too much debt. Your credit check is cleared after 6 months though. Paying bills on time and not getting into arrears is actually the best thing you can do for your credit rating.
sue.51 01.08.2004 15:15
Hi, welcome to Ciao. This practice is actually very common across the financial industry, and if you read the small print from most loan / credit card providers, they clearly state that those not matching their criteria will be offered higher rates.
Sue
Jul 30th, 2004
exceptional by (5%):
very helpful by (18%):
helpful by (77%):
