Credit checks for Cahoot internet banking customers

Customers searching online banks for the best deal available are being warned that they could be credit checked without knowing it.

The Telegraph reports that Emma Heywood, a 28-year-old civil servant from south London, discovered that Cahoot, the online bank that is part of Abbey National, had run a credit check on her as she researched her options for a personal loan on the internet. Ms Heywood claims she had not submitted a completed application for the loan when the credit check was made.

"It's disgraceful," she said. "I did not think they would perform a credit check if you had not gone through with the application. There is a broader issue here about protecting consumers from this; it is not fair to put them in this position. Cahoot's system needs redesigning so the credit check is not made until you finally submit the application."

Any credit check leaves a "footprint" behind with credit reference agencies and, if a large number of footprints appear on a record, consumers' credit ratings can be affected.

"The application process for Cahoot products clearly states on several occasions that a credit search might be conducted," Tim Sawyer, head of Cahoot, explained. "We do not run searches until applicants have selected the products they require and have confirmed that they agree to a search. But we are currently reviewing our application process to ensure that it is sufficiently clear."

Credit reference agency Experian warns people looking for loans online to make sure they are committed to taking the loan before they go through the application process.

Halifax, Nationwide, Egg and Smile all told The Telegraph that they would not make a credit check on potential borrowers until they had formally submitted an application.