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How ‘soft searching’ can help protect your credit score

06 June 2016

Gocompare.com Money is encouraging people to carry out a ‘soft search’ or ‘smart search’ when looking for credit, to help them find products which they are likely to be accepted for, without damaging their credit score.

  • Gocompare.com outlines the benefits for would-be borrowers of conducting a ‘soft search’ before applying for credit;
  • Unsuccessful or repeated lending applications can damage your credit rating and affect your future chances of borrowing.

Gocompare.com Money is encouraging people to carry out a ‘soft search’ or ‘smart search’ when looking for credit, to help them find products which they are likely to be accepted for, without damaging their credit score.

When you apply for a loan or a credit card, the application leaves a mark on your credit score.  Historically, the only way to know whether your application would be accepted was to apply, cross your fingers and wait for the lender’s response.

Unsuccessful or repeated applications can have a negative effect on your credit score.  A soft search (also known as a ‘smart search’) lets you check what credit deals you are most likely to be accepted for without affecting your credit score. 

Matt Sanders from Gocompare.com Money, commented: “When you need to borrow money you obviously want to get the best deal you can – so it’s tempting to apply for the products with the lowest interest rates.  But what many people perhaps don’t realise is that lenders don’t offer their best advertised rates to everyone.

“When assessing an application, lenders search your credit report to get a picture of how you’re managing any current credit you hold and how you’ve managed it in the past.  This search is then recorded on your credit report, which future lenders will be able to see.  If a lender considers you to be at greater risk of defaulting on your borrowing, they might decline your application or offer you less favourable terms.

“Lenders only have to offer their advertised deals to 51% of successful applicants.  This means that even if your application is accepted, the terms you are offered may be different to those you saw advertised.  For example, you may be required to pay a higher interest rate, or be offered a lower credit limit.”

Matt Sanders continued: “If your application is rejected or you’re offered a less favourable deal which you then don’t accept, the ‘failed’ application will be recorded on your credit file.  If you then apply for another product, the next lender you apply to will see you previous applications, which may have an adverse effect on their decision to lend to you.

“A better way to access a good credit deal is to make a soft search.  This allows you to look at a range of products and see which offers are likely to be available to you, without adversely impacting your credit report.”

Gocompare.com Money's loan and credit comparison services include a 'smart search' feature which shows customers their likelihood of acceptance before the apply - without affecting their credit score.

What happens when you apply for credit?

To make sure you are a suitable candidate for borrowing, lenders require you to complete an application form.  This enables them to check your identity (to guard against fraud), whether you meet their eligibility criteria, as well as your creditworthiness.  Lenders cross-check the information you supply against anything else they know about you, such as any previous dealings you've had with them or their affiliates.  They also access the information held on your credit report compiled by one of the three credit reference bureaus (Equifax, Experian and Callcredit).

The dangers of multiple applications to your credit score

If an application for credit is declined or you’re not offered the deal you wanted, it’s tempting to apply for different products instead.  But multiple applications for credit can damage your credit score – which in turn can adversely affect your ability to obtain credit in the future.

Each time you make an application for credit it is recorded on your credit report.  When checking your eligibility for future credit, lenders will see your previous applications.  They may wrongly assume that if you haven’t accepted previous offers of credit, that you were rejected.  Also, multiple applications made in a short space of time might suggest to them that you are desperate for money which you may struggle to repay.

The benefits of soft searching

You can increase your chances of being accepted for credit by using a soft search before you apply for a particular product.

A soft search gives would-be borrowers the ability to check their eligibility for a particular product before making a full application.  While a soft search is recorded on your credit file like every other search, lenders won’t be able to see it so it won’t affect their lending decision.

A soft search can give you an indication of the products you are likely to be accepted for, but it doesn’t guarantee that your application will be successful.  This is because lenders use a number of different criteria in addition to your credit rating when accessing an application.

Gocompare.com has produced a guide on soft searches for credit.

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