Checking my latest credit report from Noddle/CallCredit, I see that Monzo has performed two random credit searches. One had a stated purpose of “Quotation Search”. Since I do not have an overdraft (does Monzo even have one?), what is the reason for these searches?
Credit Referencing Agencies - are they a necessary evil?
Why was my overdraft offer withdrawn?
Why was my overdraft offer withdrawn?
I believe they do a soft search to determine whether to offer you an overdraft, whether you ask for one or not
That makes sense. I can’t say I have seen any overdraft offers, or see anything related to overdrafts within the app.
It was my understanding that my explicit consent is required for even a soft search - is this not the case? Certainly, any bank has asked me first before performing a credit search.
They’ve explained what this is & that it doesn’t affect your credit score in a blog post -
When you sign up for a Monzo account or upgrade your account, we run something called a “quotation search.” Sometimes known colloquially as a “soft credit check” or “soft footprint,” this type of search will not affect your credit score.
It was introduced by legislators to allow people to shop around for credit, without affecting their credit scores. It’s the kind of search carried out when you shop around for loans or mortgages on a price comparison site like Money Supermarket or Go Compare. Quotation searches like this will appear on your credit record, but lenders are not allowed to take them into account when making lending decisions.
When you upgrade your account, we run this type of check to determine whether or not we’d be able to offer you an overdraft, in case you want one in the future.
Once your upgraded Monzo account is open, we also notify our credit reference agency that you have a bank account with us.
Opening a bank account should not affect your credit score, unless you get an overdraft, or you’ve opened lots of accounts in a short period of time.
An overdraft can affect your credit score positively or negatively, depending on how you use it. Overdrafts on Monzo are 100% opt-in, meaning you can choose whether to have one or not. They won’t affect your credit score unless you explicitly switch on your overdraft.
I have a feeling you’re thinking about a hard search there & Monzo does ask your permission before performing those - if & when you apply for an overdraft.
Either way, as the blog post I’ve shared above explains, the soft searches are very unlikely to affect your credit score.
Not a lawyer, but it is my understanding that anyone who wants to access your personal details needs your permission to do so. That should include soft credit searches. If you are concerned then I would contact a lawyer though, as they can give better advice.
I would however think that you most likely consented to soft searches when you signed up for monzo
[Edited the above, as it’s incorrect, thanks Sufi:]
It appears that your consent is not needed to query your credit file:
Do companies need my consent to carry out a credit search
The [Data Protection Act] doesn’t actually require these companies to have gained your consent before they can carry out a search of your credit file as long as they have a legitimate reason for doing so and you have been told that this search is going to take place. If you have taken out a loan or credit card you will probably find this in the original terms and conditions that you signed.
Yes, I’m pretty sure this consent was in the T&Cs…
Soft checks to open an account and to consider an overdraft. Hard check when accepting an overdraft.
Though I’m of the opinion if I don’t ask for credit, no checks should be applied without my express consent.
Good joke. There is almost nothing of value in those T&C and most certainly nothing about credit searches. Those terms are a joke, as they don’t mention the most basic of the basic.
This to me is Monzo’s greatest threat: legal action due to something that should have been been in their terms and wasn’t, poses a real risk here, in my opinion.
It is normal practice in Banking that all new current accounts require a Credit Check, the fact that Monzo did a soft search means your credit score won’t be impacted.
Additionally, most Banks report all current accounts to Credit Agencies, this will actually help your credit score in the longer term rather than damage it.
Finally, due to open banking expect to see multiple soft searches being undertaken by institutions that offer credit - the way to opt out of this is to close your Bank accounts, as all Banks have signed up to it - thus the only way to opt out is to remove yourself from the Banking system.
It is in the T&Cs
16.1 We will search your record at credit reference and fraud prevention agencies. These searches are to check your identity
Also to note
It cannot affect your credit rating or score when you apply for credit. It is not seen by other lenders. It is included on your credit report so you know the search was made but does not affect your credit rating, or score, when you apply for credit.
Users agree to soft checks being carried out as part of T&Cs. The relevant info starts at 16.1 (16.7.1 too) for people who want to know more. Credit agencies are not allowed to take soft checks into account, it’s only listed so you know this search has been done. It does not affect your score in any way.
We will search your record at credit reference and fraud prevention agencies. These searches are to check your identity and we do not carry out full credit reference checks or credit scoring for this purpose.
16.2 Credit reference agencies may check the details you supply against any particulars on any database (public or otherwise) to which they have access. An unrecorded enquiry will be made. An unrecorded enquiry is a search that was not made for lending purposes. It cannot affect your credit rating or score when you apply for credit (emphasis mine).
It is not seen by other lenders. It is included on your credit report so you know the search was made but does not affect your credit rating, or score, when you apply for credit.
We will process, use, manage, control, release and record information about you to:
search credit reference and fraud prevention agencies’ records (including information from overseas) to manage your account;
Is the search due to you opening your account? It looks like the terms state searches will be done when you open your account (fine) or go for an overdraft (fine) but is this just a random search?
Monzo doesn’t even show in my credit account, and I’ve had a current account for a while.
I opened the current account maybe 3-4 months ago (with the prepaid card before that). The search happened on 3rd March, so it seems to be random.
That does seem strange. I’d bring it up with in-app chat to just check. I’m sure there’ll be a reason!
These terms and conditions seem to apply to the prepaid cards though.
Isn’t the T&Cs for the CA? the Prepaid terms are filed below the CA terms and listed under ‘prepaid account’.
It is very very confusing, but it is my understanding that these terms are for the prepaid (titled “Prepaid card - 18th December 2017”), and these terms for the current account (titled “Current Account v1.3 - 18th December 2017”).
Someone from the Monzo team recently implicitly seemed to acknowledge this as well, by stating that residency requirements are not mentioned in their T&C (they are mentioned in the first [prepaid] terms, but not in the second [CA] terms).
As a matter of fact, it should be noted, though, that the current account terms include the sentence:
You should read this document along with our Data Privacy Notice.
And that those include this sentence:
We use this information to:
- Help manage your account
- Track, analyse and improve the services we provide you and other customers
- Search your record at credit reference and fraud prevention agencies to check your identity and generate a credit assessment of you. Credit reference agencies will keep a record of our enquiries, which may also be used by other organisations with access. This may affect your ability to get credit.
So, it looks like the current account terms do actually indirectly cover credit searches.
I think it is confusing and not especially helpful. And the level of detail and the clarity given to the product which is closing, versus the level of detail given to the new product seems to my way of thinking rather bizarre.