What’s the difference between a soft and hard credit search?

When you apply for a loan, the lender will almost certainly carry out a credit search. There are two types of credit searches. Firstly, a ‘soft search’ and also a ‘hard search’. These searches can affect your credit report in different ways. Thus, it is useful to understand the difference between a soft and hard credit search.

Credit Reports

A credit report details your financial history, block by block. This report usually includes personal information such as your name and address and a list of your credit accounts. It also, importantly, lists any outstanding payments or debts. It shows whether or not you have made payments in full timeously, and the answer to this greatly affects your credit score.

If you apply for a loan, the loan company will want to see your credit report to check if you are eligible. Or trustworthy. You can check your information yourself to get a picture of how your score and history looks. If necessary, you can take steps to improve it. A credit search is a way of viewing this information.

What is a hard search?

A hard search gives an in-depth look at your credit history. This provides companies a view of not only what credit agreements you’ve made in the last six years, but also how you’ve managed repayments. If you’ve been late with a repayment, missed it or been subject to a formal debt solution, lenders will be able to see this when they check your credit history.

Uses

This type of search will often be used when you are applying for a loan, car finance, mortgage, or a credit card. A hard search leaves a ‘footprint’ on your credit report. Prospective lenders will be able to see this. This will stay on your report for at least 12 months and too many hard searches can negatively affect your chances of getting credit.

If you have many recent hard searches on your report, it might put companies off lending to you. Thus, check your eligibility or use comparison sites before applying for any loans or credit. Only proceed if you have a strong chance of being accepted.

What is a soft search?

A soft search is usually used when you apply to check your credit report yourself, or when a company is running a background check on you. It gives a general outline of your financial situation and verifies your identity without going into great detail.

The main advantage of this type of search is that it does not leave a mark on your credit report. If you are shopping around to find a suitable loan, comparison companies may use a soft search to find the best match for you. Soft searches may also be used by your landlord, energy provider, or employer to get a general idea of your financial situation.

When applying for a loan, a soft search is not enough to make sure you’re eligible. A hard search will have to be completed before you can take out a loan. There are very few loans available that would not include a hard credit search. A soft search gives a general overview of your situation, and if a company then thinks you meet their criteria, they will ask to view the in-depth report to decide. You can carry out as many soft searches as you want – only you will be able to see them.

Will I know if a company is doing a soft or hard search?

Companies will need your consent before they can run a hard search. This means you can control the number of hard searches that are performed, to ensure you don’t negatively impact your credit score.

It is important to remember that the act of applying for a loan often means you are giving permission for the company to run a credit search. Make sure you always read the application carefully. Check your terms and conditions without fail.

Any searches will show up on your credit report for a year. You will be able to see everyone who has had access to it. Soft searches are only visible to you. Hard searches can be seen by all potential lenders.