If you're a new customer shopping online at Next, you should beware a threat to your chances of getting a loan, credit card or mortgage, a MoneySavingExpert.com investigation has found.
This is because when you use its web checkout for the first time, the clothing giant automatically begins the process of signing you up to an account which would allow you to pay on credit — even if all you want to do is pay there and then on plastic.
If you've got a good credit history there's no problem. But if you've got a patchy credit record, Next will not only deny you an account you may not have wanted in the first place, but when other lenders check your credit history when you apply to them, they'll see you 'tried to get credit' at Next, which can harm your chances.
So even if you never had any intention of taking credit at Next, you may be penalised as though you wanted to take advantage of its facility.
This is referenced in the small print but the implications are not spelt out. Since we contacted Next, it has agreed to review its policy.
MoneySavingExpert.com managing editor Guy Anker says: "For a company with the size and reputation of Next, this is an outrageous way to treat its customers.
"It's unclear whether it even understands the implications of its credit policy, given when we questioned it, we had to ask and re-submit our question umpteen times because we didn't get a coherent answer immediately.
"Anyone shopping online at Next needs to be aware of the risk to their chances of getting a loan, credit card or mortgage in the future.
"Certainly, if you plan to apply for credit soon, beware creating a Next online account."
What actually happens when I shop online at Next?
To buy online with the clothing giant, here are the steps you go through if you don't yet have an online account with the store.
- Step 1. You're asked to create a Next web account, which is normal for many online retailers.
- Step 2. In doing the above, Next will go a step further and automatically begin the process of signing you up to a credit account. While it doesn't actually sign you up fully, it checks how much credit it would give you if you took up that option.
So what's the risk?
This depends on how Next views your creditworthiness. In other words, does it think you have a decent credit rating?
- If your credit is good, you should be OK. It's not much of a problem as Next only performs a 'soft search' on your credit file that only you and Next can see. You'll then be told what your credit limit would be if you wanted to use it. To use this credit, you'll need to apply for it, which creates a more dangerous 'hard search', though this is spelt out to customers.
- If your credit is deemed to be bad. Warning! Here is where the problems lie. You will ONLY be offered the 'pay now' option, but if Next decides it doesn't want to give you credit, it will also record a 'hard search' on your credit file. This can harm your chances of getting a loan, credit card or mortgage in future. This is because other lenders will be able to see this, and too many hard searches in a short time can harm your ability to get credit. 'Hard searches' are usually only recorded when you actually apply for credit.
You're presented with this warning before you agree to create a Next online account. While credit rating experts will understand its meaning, those who don't engross themselves in the subject on a daily basis may be blissfully unaware of the consequences. This is the text Next uses:
"By clicking on the continue button below you are agreeing to a credit search being carried out. This credit search will NOT appear on your credit file when viewed by other lenders, unless you take the option of credit from us, or we are unable to offer you credit.
"It will only be visible to you and Next. You will have the option to pay using a credit or debit card once you have completed your order."
Next fails to correct past mistake
Next had promised to completely end its policy of credit checking all customers shopping online, after criticism in 2011.
Back then, anyone shopping for goods online was hit with a 'hard' search, regardless of their credit rating. But our investigation shows it has failed to go the whole hog.
So why does Next do this?
Next says a soft search is carried out when a customer signs up to buy something online for "fraud prevention". It's not common practice for retailers to do this.
Asked about the automatic hard search for those with a patchy credit history, a Next spokesman says: "We are looking into changing this particular aspect of the process."