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Whenever you apply for credit, like a loan or credit card, you'll need to go through a credit check to make sure your new financial product is right for you. But did you know that not all credit checks are created equal? In fact, there are two main types of credit searches: hard searches and soft searches. But what do these terms mean, and why might soft search loans be better for you?
That's exactly what we aim to answer in this article. We'll share everything you need to know about soft credit checks, including what they are, how they differ from hard search products, and handy tips for picking a soft search loan provider.
A soft credit check, or simply a soft search, is a type of credit inquiry that lenders will carry out during their re-approval process to check eligibility for a loan or credit product. In that sense, they're similar to hard credit checks - but that's where the similarities stop.
Hard searches leave a trace on your credit file, visible to all potential lenders. So, if you apply for a few different loans or credit cards, the combined hard searches can give the impression that you're in financial trouble or too reliant on borrowing. Neither of those points is desirable for lenders, so your credit score can drop a little bit, at least for a short while.
On the other hand, a soft credit search doesn't do this. They're more of a snapshot of your credit score, giving lenders a gentle peek at your financial situation to help them make a decision about your suitability before you actually apply for that loan or credit card.
You can encounter a soft search credit check in a few different places, but lenders typically use them for the following reasons:
Pre-approvals for credit cards.
Loan eligibility checks.
Background checks by potential employers.
Insurance quotations.
A mortgage agreement in principle.
Price comparison websites.
When you check your own credit score on a site like Experian or ClearScore.
As the name suggests, when you enquire about a soft search loan, the lender will perform a soft credit check before you apply. This means you can check your loan eligibility without having to worry about doing any damage to your credit score. As such, soft credit check loans are an excellent way to gauge your chance of approval before committing to applying - and a hard search.
When you're applying for a loan from a direct lender, soft search options definitely have their benefits. Firstly, they can protect your credit score, helping you keep your financial health intact. What's more, without the fear of damaging your credit score, you'll be free to explore a wide range of credit options. This gives you the opportunity to spend more time enquiring about different products without the fear of immediate consequences.
And finally, when you pursue loans that use a soft search credit check, you'll uncover tailored loan or credit card terms that are honed into your specific situation. That means you can find products that better match your needs, helping you to make a fully informed decision.
As we mentioned earlier, hard credit checks do leave a footprint on your credit file. These searches are visible to all lenders, letting them see your complete borrowing history. And if you happen to have a few hard searches on your file at any point, it could imply you are in a financially uncertain situation. That can have a real effect on your credit score – and, therefore, your ability to obtain credit.
As the name suggests, hard search loans make use of hard credit checks. Applying for these products might affect your overall creditworthiness and even borrowing options, so it pays to be prepared before you start applying. Check out your credit score before applying for a hard search loan. That way, you’ll get a better idea of your current score and whether you’re likely to be accepted. Additionally, don’t be tempted to keep applying for different loans or credit cards if you get rejected. If you’re applying for similar products, there’s a good chance that you’ll keep getting turned down. And keep doing more damage to your credit score!
When a lender performs a soft credit check in the UK, they’ll do a quick assessment of your financial history to see if you’ll be eligible for the product you want to apply for. So, if you enquire about a soft search loan, this check will appear on your credit report, but it’s only visible to you - not to other lenders.
Here's how it all works:
Initial Enquiry: Once you find a product that sounds right for you, you’ll start by expressing your interest. That will likely include providing essential details like your financial situation, income, and the purpose of the loan. This information helps your potential lender to better understand your needs.
Soft Credit Check: At this point, the lender will carry out their non-intrusive soft credit check. This assessment lets them gather the information they need about your credit history without any commitments.
Eligibility Assessment: The lender will evaluate your eligibility based on the results of the soft credit check. They’ll consider various factors, including your credit score, income stability, and any existing debts. Using these points, they’ll then determine whether you meet their lending criteria.
Loan Offer: Finally, if you’re eligible, you’ll receive a loan offer that outlines the amount you can borrow, the interest rate, and the repayment terms. You can then review this offer, and if it meets your financial goals and you’re happy with the repayments, decide whether you want to accept or decline it.
Choosing a loan provider is an important decision - and one you’ll need to do a little research on before committing. Here’s our tips on everything you should consider before you make a decision:
Read Reviews: Before you pick a lender, check out online reviews to get a clear picture of their reliability, transparency, and trustworthiness. Also, take special care to research a potential lender’s customer service. Hopefully, you won’t need to use it much. But if you do have to, for whatever reason, you’ll be thankful you picked a company with a reputation for excellent customer support.
Interest Rates: If you find what sounds like a good offer, it can be tempting to dive straight in and apply - but wait! It pays to do research on the different products that could be available to you. So, make it a priority to compare interest rates and terms from multiple providers. That way, you can rest easy knowing you‘ve done everything you can to find the very best terms for your loan or credit card.
Additional Benefits: Finally, look for lenders that offer extra perks to sweeten the deal for you. You might be able to find products with benefits like flexible repayment options and lower fees, enhancing your borrowing experience.
In a word, no! A soft check is a simple way for a lender to learn more about your financial situation and let you know if you’ll be eligible for their loan product. As a result, there’s no hard yes or no involved - just a simple check to check your eligibility.
No. It’s true that a record of soft searches will appear on your credit file, but only you will be able to see those details. Banks and other lenders cannot see any information about soft credit checks that other lenders have performed. So, you’ll maintain your financial privacy, ensuring that multiple soft checks don’t do any harm to your borrowing potential.
There’s quite a few! The biggest advantages of soft search loans are:
No Impact on Your Credit Score: You can explore a number of loan options without any risk to your credit score.
Informed Decisions: You’ll have total freedom to scour the market and check your eligibility without harming your credit rating. That means you can find the very best products for you – and receive offers that are tailored to your needs and circumstances.
Privacy: Banks and lenders can’t see any record of the soft checks that other lenders have carried out, so your financial privacy is protected.
Yes! Before you apply for a Creditspring membership, we’ll run a soft credit search to check your eligibility. That way, we’ll be able to give you a clearer idea about which of our products are right for you. Then if you then apply for our product we then carry out a hard search on your file.
Soft search loans are an excellent borrower-friendly approach to lending. By checking your eligibility before you apply, you can be totally clear on your options – helping you make an informed decision without any fear about affecting your credit score. Before you decide to proceed with a soft search loan, it’s important to consider everything you normally would before taking out new credit. Spend time researching lenders and loan options, look for the best deals that suit your needs, and make sure you’re comfortable with the repayment amounts and schedule.
