When you’re in the process of applying for credit, a lender might perform a soft search on your credit file to ascertain your suitability for a loan with them. The key thing is that soft searches allow lenders to check your credit file without performing a hard check, which appears on your file and causes your score to dip.
Some lenders perform soft searches, while others – like Koyo Loans – utilize Open Banking to gain insight into your current financial circumstances.
When a lender performs a soft credit check, they reach out to TransUnion, Equifax, or Experian to request information relating to your personal finances. As the three major credit bureaus in the UK, their job is to maintain a credit file for every person who has a credit history. They consider everything from bill payments to personal information, which is collated and ultimately results in a credit score.
As you might be aware, your credit score can fluctuate over time, and how you deal with your personal finances will ultimately affect your overall score. To stand a good chance of being approved for credit, you should endeavor to keep your score high.
Why is a credit score important?
Maintaining a healthy credit score is really important as it will influence your chances of being approved for credit. People with good credit scores can typically access better rates of interest and an extended range of products that can help with their financial management. What’s more, if your credit score drops and you don’t take steps to put it right, any future credit applications that you make are likely to suffer as a result.
Why is a soft search beneficial?
The best thing about a soft search is that it doesn’t impact your credit score. This is really helpful if you’re trying to build your credit score, as several hard checks on your file in a short space of time will cause your score to dip. If you apply to lenders that conduct soft checks, you can take the first steps towards approval without worrying about your credit score dropping, which is a big bonus of this type of search. Still, it’s not advisable to submit multiple applications simultaneously, but it’s good to know that your score won’t be affected by soft searches.
How is a soft search different from a hard search?
The primary difference between the two is that a hard search will leave a footprint on your credit file. Therefore, it can be seen publicly by other lenders. Soft searches are invisible and don’t have an impact on your credit score. So, before applying for a personal loan from a lender, make sure you read the terms and conditions and understand the type of search they will perform.
Applying for a loan from a lender that performs a soft search will help your credit score in the long run and is a smart move if you’re worried about your score dipping.
