In today’s economy, where every dollar counts, many Australians are actively comparing and switching energy or telco providers to secure a better deal. While this may seem like a smart way to save money, what many don’t realise is that frequent switching between providers can damage your credit score—often without you even knowing.
At We Fix Credit, we specialise in credit repair in Australia, and one of the most common traps we see is the unintended harm caused by multiple credit checks—especially when people shop around for cheaper utility or phone plans. These seemingly harmless changes can add up to significant credit score damage over time, making it harder to get approved for important loans like a mortgage or car finance.
Why Switching Providers Can Hurt Your Credit File
When you sign up with a new energy company or telecommunications provider, there’s a good chance they’ll perform a credit check to assess your eligibility. This check is typically listed on your credit file as a “credit enquiry.”
Here’s what you need to know:
A credit enquiry remains on your file for 5 years.
- Too many enquiries can lower your score, even if you don’t go ahead with the account.
- Lenders see frequent credit enquiries as a sign of financial instability or increased credit risk.
This means that every time you change providers, even just for a slightly cheaper plan, your credit file could be taking a hit.
Soft vs Hard Credit Checks: Know the Difference
Not all credit checks are the same. There are two main types:
- Soft credit check – This type of check does not impact your credit score and doesn’t show up on your credit report.
- Hard credit check – This is a full credit assessment and will appear as an enquiry on your report, potentially lowering your credit score.
Always Ask: Is It a Soft or Hard Check?
Before switching providers or signing up for a new plan, it pays to ask the provider directly:
- “Will this application involve a hard credit check?”
- “Will this enquiry be recorded on my credit file?”
Better yet, get their response in writing (such as by email or chat transcript) so you have a record. Some providers now advertise “no credit check” or “soft check only” policies, so it’s worth doing your research to find these options.
Always Read the Fine Print
Before signing up for any service, it’s important to read the Terms and Conditions carefully. Many providers include clauses that authorise a full credit check even if you’re only enquiring or getting a quote. Understanding the T&Cs can help you avoid unnecessary hits to your credit file and make informed decisions.
How This Impacts Your Ability to Borrow
When it comes time to apply for a major loan—like a home loan or a car loan—your credit score matters more than ever. A string of credit enquiries on your report can:
- Result in loan rejections from mainstream lenders.
- Lead to higher interest rates, costing you thousands more.
- Limit your borrowing options to second-tier lenders with less favourable terms.
A Costly Mistake: Real-Life Impact
Imagine this scenario: you switch energy or telco providers five times in three years. Each time, a new credit enquiry is listed. Then, when you apply for a home loan, your bank sees five credit enquiries and views you as high-risk. You either get knocked back completely or are forced to accept a loan at a much higher interest rate.
What seemed like a smart money-saving tactic could now be costing you thousands.
This article first appeared in wefixcredit.
