Mortgage regulator clarifies credit search process

15 May 2006
If you are considering a mortgage, now is a good time to seek up-to-date advice on the different types of credit search and customer information that lenders use within the application process.

The Association of Mortgage Intermediaries (AMI) has published a factsheet to clarify the developments in credit searches, entitled 'Credit searches and Footprints'. This is available to members of the AMI who may in turn be able to inform customers about the effect of mortgage applications on their credit records.

Rob Griffiths, associate director of AMI, said that the AMI's members should make customers aware that mortgage applications can affect their credit records.

"With lenders increasingly moving towards online decisions and sophisticated product offerings for those with impaired credit records, credit searches are now often carried out earlier in the mortgage process," he said.

Although a multiple of one or more incomes has been the traditional method of calculating an approximate loan amount, over half of mortgage lenders now use new affordability predictions to determine the amount advanced for a mortgage.

When customers make an application for a mortgage, a credit footprint is registered against their name. If the mortgage lender does not approve the application, this footprint could affect a customer’s eligibility for future credit.

The factsheet sets out how credit searches work, giving details of the information credit agencies hold and how this is used.

It also distinguishes between the effect of 'soft' and 'hard' credit footprints on a credit record and the relevance of the different types to further searches.

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