What is a Soft Credit Check?

Whenever you apply for credit – in the form of a loan, credit card, or anything else – you’re likely to be subjected to a credit check. Banks and other lenders use these checks to establish whether you meet their basic eligibility criteria, and are also required to check the affordability and credit worthiness of their financial products by the Financial Conduct Authority (FCA).

When checking your credit report, lenders can either conduct a soft or a hard credit search (both known as an ‘inquiry’). There are two types of inquiries that lenders and other organisations can conduct – hardand soft.

In this guide, we explain the difference between them and summarise everything you need to know about soft credit checks.

What is a Soft Credit Check?

Soft credit checks are used by lenders and other financial organisations to take an initial look at specific information contained within your credit report. Companies generally use these searches to determine whether you could make a successful application, all without the need to conduct a full credit check.

The key feature of soft searches is that they aren’t visible to other organisations that may view your credit report. Only you and the institution who conducted the search can see them, and they won’t impact on your ability to take out credit in the future since they aren’t visible to anyone else.

How Does a Soft Inquiry Work?

Soft credit checks happen when you check your own credit report, or when a lender views your report to check whether you’re eligible for their products. This kind of inquiry provides them with a top-level overview of your financial status and could help them to pre-approve you for certain forms of credit pending a full application and search.

While organisations cannot see soft inquiries on your credit report, you can. This means that even though you can see when a search has been carried out, it won’t make a difference to your credit score or financial status.

What is a Hard Credit Check?

Hard credit checks occur when an organisation conducts a complete search of your credit report. When you apply for a credit product, a lender is required by the FCA to assess your creditworthiness and affordability for that product before they are able to accept your application. One of the ways they do this is by carrying out a hard search on your credit profile. Every hard check is recorded on your report, and other companies will be able to see that you have applied for credit. Too many of these over a short period of time could damage your credit score for up to six months, making it more difficult to get approved for loans, credit cards, and other financial products.

Whenever you apply for credit, the company will search your credit report to check your suitability. A similar exercise is also conducted by utility providers and mobile phone companies whenever you apply to use their services.

How are Soft and Hard Credit Checks Different?

The main difference between soft and hard credit checks is soft credit checks will never impact your credit score for the same reason, while hard credit searches may cause your rating to drop – especially if there are many hard searches in a short space of time.

It’s also notable that the visibility to organisations is different to hard searches. Soft credit checks can’t be seen by anybody but you, whereas hard credit checks are visible to any organisation that goes on to conduct a full search of your credit report.

How to Avoid Unnecessary Hard Credit Searches?

You can minimise the number of hard searches conducted against your credit report by making fewer credit applications. Of course, many people still need to rely on credit and so there are a few strategies you can use:

• Firstly, you may wish to avoid applying for any loans, credit cards, or other financial products for which you don’t meet the basic eligibility criteria. To do this, you’ll need to carefully check the criteria that companies apply to applications before making one yourself.

• As an alternative, you could use a reputable online credit broker to help you find loans and other financial products that you are likely to qualify for. By taking this approach, you can avoid making lots of applications without knowing whether you stand a good chance of being approved.

At Little Loans, we help people to find quick loans of between £100 and £10,000 with repayment terms from 3 to 60 months, depending on the amount you are looking to borrow, all by conducting a soft credit search. You’ll then be introduced to the direct lender from our panel that is most likely to approve your request, and from there you can choose to make a full application which will involve a hard credit search.

Why Are Soft Credit Checks So Useful?

Soft credit checks are useful because they leave no trace on your credit report. Only you and the organisation who conducted the search can see them, and so they don’t make a difference to your chances of getting credit approved in the future.

They also make it possible to get an indication of your eligibility for a wide range of financial products without having to apply and undergo a full credit search. There’s no limit on the number of soft checks you can have, and they’ll never have an impact on your credit score.

Can You See Soft Inquiries on Your Credit Report?

Yes. You can view soft credit searches made on your own report, but the other companies you apply to for credit in the future cannot. This means that soft credit searches will never have an impact on your credit score, and they won’t affect your ability to access credit in the future no matter how many are carried out.

How Do Soft Inquiries Impact Credit Scores?

Soft credit searches do not impact credit scores, and companies that view your credit report cannot see them – even if they conduct a full search.

In contrast, hard credit checks can be seen by any organisation conducting a full credit check and many over a short space of time may indicate to some lenders that an individual is less financially stable.   

Should You Worry About Soft Credit Checks?

Put simply, no. Soft credit checks don’t show up to anyone other than the individual when they check their own credit report, and so they will never cause your credit score to drop.

Since soft credit inquiries can’t be seen by other companies, they also can’t affect your chances of getting approved for credit.

How Long Do Soft Inquiries Stay On Your Credit Report?

Soft credit searches never appear to anyone other than the individual concerned, but hard credit checks are slightly different. These stay on your credit report for 12 months, although some checks conducted by debt collection officers and companies can remain on your report for longer.

Soft Credit Checks – Summary

Soft credit checks are used by a range of organisations to get an overview of your financial situation. These inquiries allow them to determine whether you are likely to meet the necessary eligibility criteria for a loan, credit card, or any other form of credit – all without needing to perform a hard credit search.

The important thing to remember is that soft credit checks will never affect your credit score, and will not impact your ability to get approved for financial products in the future. They’re a useful tool that can help you to avoid applying for credit that you’re unlikely to be approved for, minimising the need to approach multiple lenders over a short space of time.