Credit enquiries can have a significant impact on your credit score and mortgage loan approval in the UAE. It's essential to understand what they are, how they work, and how they can affect your ability to secure a mortgage.

What is a Credit Enquiry?

A credit enquiry is a request made by a lender or creditor to check your credit report. This inquiry provides the lender or creditor with information about your credit history, including your current debt, credit score, and payment history. Two kinds of credit enquiries exist, namely soft enquiries and hard enquiries.

Soft enquiries occur when you or someone else checks your credit report. They have no impact on your credit score and are not visible to lenders. Examples of soft enquiries include checking your own credit report or a lender pre-approving you for a loan.

On the other hand, hard enquiries occur when a lender or creditor checks your credit report as part of a loan or credit application. These enquiries can have a negative impact on your credit score, as they suggest you are actively seeking credit.

However, the impact on your credit score is usually minimal, typically a few points, and they will remain on your credit report for two years.

How Do Credit Enquiries Affect Your Credit Score?

Credit enquiries can affect your credit score in two ways: the number of enquiries and the types of enquiries. The number of inquiries refers to how many hard enquiries you have had in a short period. If you have multiple hard enquiries in a short time, it can suggest you are a high-risk borrower and may negatively impact your credit score.

The types of enquiries refer to the type of lender making the enquiry. If you have multiple enquiries from a specific type of lender, such as a credit card company or auto lender, it can suggest you are actively seeking credit and may negatively impact your credit score.

How Do Credit Enquiries Affect Your Mortgage Loan Approval?

When you submit your application for a mortgage loan, lenders will check your credit report to determine your creditworthiness. A high number of recent hard enquiries can signal that you are a high-risk borrower and may affect your ability to secure a mortgage. Lenders may be hesitant to approve your mortgage application if they believe you are seeking too much credit at once, as it suggests you may struggle to make repayments.

However, not all credit enquiries are equal. If you have multiple enquiries in a short period, but they are for the same type of loan, such as a mortgage or auto loan, they may be treated as single enquiries. This is known as rate shopping and is designed to encourage consumers to shop around for the best deal.

How Can You Minimize the Impact of Credit Enquiries on Your Credit Score and Mortgage Loan Approval?

If you are planning to apply for a mortgage, you can take steps to minimize the impact of credit enquiries on your credit score and mortgage loan approval. These steps include:

• Limit the number of hard enquiries: Only apply for credit when necessary, and avoid applying for multiple loans or credit cards in a short period.
• Check your credit report: Regularly check your credit report for errors or inaccuracies that could affect your credit score.
• Be mindful of rate shopping: If you are shopping around for the best mortgage deal, try to do it within a short period and avoid applying for multiple loans or credit cards at the same time.
• Consider a mortgage broker: Mortgage brokers in Dubai can help you find the best mortgage deal without requiring multiple applications, which can reduce the number of hard enquiries on your credit report. Using Holo's digital mortgage services is free and our expert mortgage advisors will work on your behalf to get you the best mortgage in the UAE for you.

In conclusion, credit enquiries can have a significant impact on your credit score and mortgage loan approval in the UAE. It's important to be aware of the types of enquiries and how they can impact your creditworthiness. By taking steps to minimize the impact of credit enquiries, such as limiting the number you will be taking accountability for your credit score and keeping it as high as possible.

To understand how much you could be eligible to borrow use our digital mortgage calculator.

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