Do loan applications affect your credit score?

Loan applications can impact your credit score, so it’s best to avoid making too many in a short amount of time.

If you’re thinking of applying for a personal loan, you could understandably be nervous about how this might affect your credit rating. This might be especially true if you’re hoping to take out a mortgage in the near future or if you’ve been working to improve your credit rating.

Will loan applications be visible on my credit file?

Yes. Loan applications almost always involve a “hard” credit search, which will be logged on your credit file. It’ll be visible there to both yourself and to any future prospective lenders you authorise to run a credit check.

However, lenders don’t report to credit reference agencies ( CRAs) whether a loan application was successful or unsuccessful.

A hard search on your credit file will usually remain there for 12 months. However, if a debt collector runs a search on your credit file, this will stay on your report for 2 years.

Does a loan application affect my credit score?

Almost all applications for credit will have a small adverse impact on your credit score. That’s because any responsible lender will always run a “hard” search on your credit file before offering you a loan, and it’s normal for this search to have a slight negative impact on your credit score.

However, as the effect of a single application on your credit score is unlikely to be dramatic, if you borrow responsibly (making repayments on time, for example), your score should soon improve again.

Most of us have to borrow money at various points in our lives, so 1 or 2 applications for credit every few years is fairly standard stuff. Anybody reviewing your credit record is unlikely to be alarmed by this. In fact, to build your credit score up to a high level, it’s necessary to use credit responsibly.

If a would-be lender can see in your credit file that you’ve borrowed money in the past and always paid it back on time, that’s reassuring (and it’ll also have helped increase your credit score). But if you’re asking to borrow a large sum of money, and there’s no evidence in your credit file that you honour your credit commitments, then that’s a bigger gamble for the lender to take.

It’s worth noting that there are 3 different widely-used CRAs in the UK – these are Equifax, Experian and TransUnion. As an individual, you don’t have one definitive credit score as score ranges vary depending on the agency (although if you have a good score with one, you’ll usually have a good score with the others). Additionally, different lenders interpret credit reports in different ways, so what might be a red flag for one lender, might not be an issue for another.

You can check your Equifax credit score and report through Finder for free.

How can personal loans hurt your credit score?

If you have a personal loan and you don’t keep up with your monthly repayments or you do not pay off your loan in full before the end of the term, this can have a negative impact on your credit score.

The table below outlines some of the events that could occur during the life of your loan that could hurt your credit score, as well as how long they could stay on your credit report:

EventLength of time on credit report
Hard search1 year
Late or missed payments6 years
County court judgments6 years
Defaults6 years
Bankruptcy6 years
Individual voluntary arrangement (IVA)6 years

How can loan applications affect my chances of securing credit in the future?

If you make multiple applications for credit in a short space of time, not only will this lower your credit score, but a potential lender might think you are in financial difficulty or rely too much on borrowing. While the lender won’t know if you’ve had applications rejected without asking you, it may draw conclusions from your credit file – for example, if you made a number of applications for credit but these were not followed by any repayments.

Because of this, it’s sensible to use an eligibility checker before you apply for a loan as these only use a “soft” search which won’t affect your credit score. Eligibility checkers will show you which loans you’re more likely to be accepted for and will prevent you from wasting time applying for ones you’ll be rejected for. Once you’ve found the best loan for you to apply for you, you can then make your application in full. If you haven’t already, you can also check your credit score and report. You’re entitled to request a free “statutory” copy of your report from the three credit reference agencies. This will help you to see where your credit score sits and whether there’s any incorrect information on your credit report – if there is, you should get it corrected straightaway.

The overall impact of a single loan application on your credit score is believed to be minimal, so it’s rare that it will make or break your application for a small loan. Your credit history in the months and years before your application will have a far bigger impact. However, if you’re planning on applying for a mortgage or large loan in the near future, it’s a good idea to avoid applying for any products that involve a credit check. With these large loans, the average applicant needs all the help they can get to be approved.

Tips to protect your credit when taking out loans


  • Get to know your credit report to get an idea of how you look to lenders.
  • Check you meet a lender’s minimum eligibility criteria before applying for a loan.
  • Use an eligibility checker (either each lender one at a time on their respective sites or check multiple lenders in one go with a broker or comparison site) to find out if it’s worth applying for a particular loan in the first place.
  • Shop around and then apply to a lender that you’re reasonably confident will approve your application.
  • Quickly sense-check whether a personal loan is the smartest option (in some cases, a credit card can work out cheaper).


  • Make multiple applications for a loan in a short amount of time.
  • Apply for any credit products in the months leading up to a mortgage application.
  • Apply without running an eligibility check first.
  • Apply unless you’re confident you can meet the repayment schedule.

Bottom line

Full loan applications do have a slight – and normally temporary – impact on your credit score.

However, applying for credit and using it sensibly can help to prove to lenders that you’re a responsible borrower which can help you to get access to more credit in the future. On the flipside, if you’ve never applied for or used credit before, lenders have no way of knowing how reliable you are as a borrower and you could find it harder to get accepted for loans in the future.

Frequently asked questions

Read about how different factors can affect your score

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.

Written by

Chris Lilly

Chris Lilly is Head of publishing at He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full profile

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