What is a soft credit search?
Whether you’re looking to borrow money for a loan, mortgage, or credit card, you’ll have heard about soft credit searches. But what are they and how do they affect your credit score?
Key points
- Soft credit searches are only visible to you on your credit file
- They can be used to tell you which loans and credit cards you’re more likely to be accepted for
- They won’t affect your credit score, no matter how many are performed
What is a soft credit search?
A soft credit search is when either you or a company runs an enquiry on your credit report.
Unlike a hard credit search, it won’t have any impact on your credit score. In fact, it won’t be visible to lenders at all, so you can run as many soft credit searches as you like.
They’re usually used to confirm your identity or as pre-approval for accessing credit.
They can be used to:
- Check your own credit report
- Run an eligibility check to show you the credit cards and loans you’re more likely to be accepted for
- Get a mortgage in principle. This enables you to see how much you’d potentially be able to borrow to buy your next home.
- A potential landlord may run a soft credit check to confirm your identity before renting to you
What happens to my credit report when there is a soft credit search?
It doesn’t leave a footprint on your file and will only be visible to you. Lenders won’t be able to see it, but you’ll still be able to view all searches conducted on your credit report, whether soft or hard.
How does a soft credit search work?
A soft credit search enables the person conducting the enquiry, whether that’s you, a lender, or a third party, to have an initial look at your credit report without accessing in-depth information on your borrowing history.
What is a hard credit search?
It’s a complete check of your credit report performed by lenders when you’re applying for credit.
Hard credit searches may take place when you:
- Apply for a loan, credit card, or mortgage
- Apply for a mobile phone contract
- Apply to rent a property
- Open an account with a utility company
You should be informed before a hard credit check is done.
Essentially, the lender is trying to determine whether you’re a good candidate and the level of risk you pose. They want to see whether they’re likely to get their money back (plus interest, where applicable) by understanding your borrowing habits in the past.
They’ll be able to view information like whether you’ve defaulted on payments, have previously been declared bankrupt, or if you have any county court judgments recorded on the Register of Judgments, Orders, and Fines - all of which remain on your credit file for six years.
Why does a hard search affect your credit score?
A hard search shows that you’ve applied to borrow money.
It will affect your credit score temporarily if you’re accepted (usually only by a few points) but should build back up again as you make your repayments.
If you’re rejected, it can negatively impact your credit score and you might find it takes longer to recover. Multiple applications (whether approved or denied) within a short time period could see your score drop sharply, making it harder to be accepted for credit or the best interest rates in the future.
It signals to lenders that you may be struggling financially, making you a riskier option. All hard searches will remain on your credit file for one year, after which they’ll disappear.
What’s the difference between soft and hard credit checks?
Soft credit checks won’t be visible to lenders, only to you, so they won’t be considered during an application process.
They’ll have no impact on your credit score and can be performed by you, a lender, or a third party.
Also, a soft credit check can be done without your permission, whereas typically you’ll be notified before a hard credit search gets underway.
How to check your credit score
You can check your credit score for free with any of the three main credit reference agencies – Equifax, Experian, and TransUnion.
This will just be an overview of your credit file so for a more detailed look, you might want to think about signing up with one of them. You’ll be required to pay a monthly fee for the privilege, but you may be able to take advantage of a free introductory offer.
It’s important to check that the information held in your file is correct and to get it changed if it isn’t. This could help to give your credit score a boost.