Does a Bridging Loan Affect
Your Credit Score?
Credit scores are a common cause for concern where all types of loans and credit facilities are concerned. With most conventional loans, mortgages, and cash advances, unsuccessful applications can leave a negative mark on your credit report.
There are even some types of loans (such as consolidation loans) that can adversely affect your credit score, simply for applying for them in the first place.
But how does an application for a bridging loan affect a person’s credit score? Given how it is perfectly possible to qualify for bridging finance with poor credit, does the application process come with any risks to the borrower’s credit history?
Soft Search Credit Facilities
The answer, as is often the case, depends on a multitude of factors.
Prior to submitting an application for bridging finance, it is always advisable to seek the input and advice of an independent broker. An essential part of the initial consultation, your broker will help you determine your suitability and eligibility for bridging finance.
They will take a detailed look at your current financial position and your credit history to date to help you decide whether to apply. None of which will have any bearing on your credit score, irrespective of the outcome.
If you decide to go ahead with a bridging loan application, your broker will reach out to one or more approved lenders on your behalf. At which point, your application will be considered by the lender on a more formal basis inclusive of a ‘soft’ credit search. This is where a credit history check is performed in the normal way but leaves no mark on the applicant’s credit history.
It is therefore possible to go through the bridging loan application process in its entirety without risking credit score damage – even if your application is refused. Even so, this often applies only when submitting applications via experienced brokers. If you were to take your application directly to a lender, it could impact your credit score if rejected.
After Taking Out a Bridging Loan
Your credit score will influence the affordability of the loan you are offered and could play a role in determining your eligibility. If your application is successful, you need to ensure you uphold your side of the agreement to safeguard your credit score from potential harm.
As with all types of secured and unsecured loans, your credit score could be damaged if you fail to meet your repayment obligations. For example, if you agree to repay the interest on your bridging loan on a monthly basis, it is important to ensure that you do not miss a single monthly repayment along the way. Towards the end of the agreed loan term, you must ensure all contingencies have been planned for where your exit strategy is concerned.
It is also worth remembering that all fees and charges payable on the loan are subject to the same terms and conditions as the actual loan balance itself. If you fail to pay any of these fees on time as agreed, it could result in a negative entry on your credit report.
What to Do if You Cannot Repay a Bridging Loan
If you anticipate any difficulties at any time with the planned repayment of your bridging loan, you must reach out to your lender at an early stage. It is almost always possible to reach agreements where unexpected issues are encountered, such as an extension of the repayment term, or suspension of all repayments for a short period of time.
Even so, a bridging loan should never be taken out if you do not have 100% confidence in your ability to repay the loan in full and on time; one of many reasons why it is important to seek independent broker support before applying, in order to assess your suitability for bridging finance.
