Will a bank, credit card company or mortgage company lend you money? To decide, lenders perform two types of credit checks in order to learn about your financial history and how likely you are to pay them back: soft credit searches and hard credit searches. One of these is innocuous, the other can lead to problems if you're not judicious. Let's look at the differences.
Hard searches have a bit of a reputation, as they leave a footprint on your credit record that other lenders can see. Lenders are wary of a record with lots of recent hard searches, since they can indicate you are desperately in need of credit and therefore a risky profile.
What is a Hard Credit Search?
Hard searches are initiated when you make a formal application to a credit product, like a credit card, loan, or mortgage. Hard searches provide the lender with full access to your credit report so they can make an informed decision regarding your application.
Each formal credit application leaves a hard search that will show on your credit report for a year. Too many of these marks in a short period of time can reduce your credit score and scare off potential lenders—lots of credit applications in a short period of time may be a sign you are struggling financially.
Lenders wary of your credit history (e.g., because they see lots of hard searches) may either decline to give you credit or may charge a higher interest rate on money they lend you.
What is a Soft Credit Search?
Soft searches are less robust, returning just an overall picture of your financial health. The lender will see your credit score but not all of the nitty-gritty details (e.g., payment history, outstanding debt levels, CCJs, etc.). A prospective employer may even perform soft searches to get a feel for your level of responsibility and alert them to any financial strain you may be facing.
Or a potential lender may perform a soft search if you simply ask for a quotation (not a formal product application), e.g., on a loan or insurance. When making enquiries, be sure to ask if the lender will perform a hard or a soft search of your credit record.
Most credit cards in the UK let you perform an "eligibility check" which is a soft search to find out if you're likely to be accepted before you apply (at which point they do a hard search).
Can Lenders See a Soft Credit Search?
Soft searches do not leave a mark on your credit history, so potential lenders cannot see how many have been done. However, you can see soft credit searches when you check your own credit report.
Credit Cards that Offer Soft Searches
It’s becoming more and more common for lenders to offer a "soft search" eligibility check before you formally apply to a credit product. Soft searches are often embedded in an "eligibility checker" on the lender’s product pages on their website. Eligibility checks using a soft search will generally give an indication, not a guarantee, or your application success.
Once an eligibility check returns the likelihood your application will succeed, you can then decide if you want to formally apply. Below is a list of companies that offer a soft search service, so you can test your eligibility before formally applying and leaving a footprint on your credit record:
- American Express
- Asda Money
- Capital One
- Sainsbury's Bank
- Virgin Money
Of the eligibility checkers listed above, only one virtually guarantees their tool will tell you if you are approved before you apply: Capital One’s QuickCheck. The only circumstances under which a "yes" from QuickCheck will not turn into a "yes" on your application is if the subsequent hard search (performed only when you formally apply for the card) returns certain information from fraud prevention databases or your identity can’t be verified. (Remember to register on your electoral roll—this helps verify your identity and improve your credit score!)
No matter which type of credit card you're looking for, it can be a good idea to use a card's eligibility checker to avoid applications that may be declined.