
A “soft search loan” is a loan where the lender or broker performs a “soft credit check” rather than a full credit check to assess your eligibility.
This soft search provides lenders with a preliminary look at your credit history without affecting your credit score or leaving a visible mark on your credit file.
Soft search loans have become popular in the UK as they allow potential borrowers to explore options without the risk of harming their credit rating.
Here’s what you should know about soft search loans, including how they work, who may benefit, and important points to consider.
What is a Soft Search?
A soft search, also known as a “soft inquiry,” is a type of credit check that does not impact your credit score. When you apply for a loan or compare loan options using a soft search, the lender will look at basic information on your credit report to get an idea of your creditworthiness.
However, unlike a “hard search,” which happens when you formally apply for credit, a soft search does not leave a trace that other lenders can see.
A soft search typically provides details on:
- Your history of managing credit, including any missed or late payments
- Public records related to your financial situation
- Basic information on your current credit accounts
The main advantage of a soft search is that it protects your credit score, which can be helpful if you are considering multiple loan options and want to compare offers without any impact on your score.
How Soft Search Loans Work
For a soft search loan, the process begins when you submit information to a lender or loan comparison service.
The lender will then perform a soft search, which allows them to see whether you meet the initial criteria for the loan.
This process allows them to give you an indication of the terms and amounts you may qualify for, all without affecting your credit score.
If you decide to proceed with a loan offer based on the soft search, you would then need to go through a hard search.
This is the formal application stage, where the lender will perform a full check on your credit file to finalise the loan terms.
Be aware that this hard search will leave a mark on your credit report that other lenders can see.
Benefits of Soft Search Loans
1. Credit Score Protection
One of the biggest advantages of soft search loans is that they allow you to shop for credit without harming your credit score.
Each hard search made by lenders can lower your score slightly, and too many hard searches in a short period can make you appear risky to lenders.
With soft searches, you can view potential loan options without this concern.
2. Easier Comparison of Loan Options
When comparing loans, it’s essential to consider factors such as interest rates, repayment terms, and eligibility requirements.
Soft search loans allow you to receive tailored information on these aspects from various lenders, making it easier to compare options before making a final choice.
3. Transparency for People with Poor Credit
Soft search loans can be especially helpful for those with a low credit score.
By using a soft search, people with poor credit can explore loan options without fear of rejection marks showing up on their file.
They can gauge whether they qualify and, if necessary, work on improving their credit before applying.
Who Might Benefit from Soft Search Loans?
Soft search loans may benefit:
- First-Time Borrowers: Individuals new to borrowing who want to explore loan options without impacting their score.
- Those with Limited Credit Histories: People with thin or limited credit files can use soft searches to check what’s available to them.
- Individuals with Previous Credit Issues: Borrowers with a history of missed payments or defaults may find it helpful to use a soft search to check their eligibility without risking further impacts.
- Anyone Looking to Compare Loans: Those comparing different loan options will appreciate the ability to look at potential offers from multiple lenders.
Important Considerations for Soft Search Loans
When using soft search loans, keep the following in mind:
- Soft Search is Not a Guarantee: While a soft search can indicate loan options, it is not a guarantee of approval. Final approval will still depend on the hard search and full assessment by the lender.
- Terms May Vary: The initial offer based on a soft search may differ slightly from the final terms. Lenders may adjust interest rates or other terms after performing a hard search.
- Be Cautious with Loan Comparison Sites: Many loan comparison sites offer soft search services, but it’s essential to check the terms and privacy policies. Some may collect data or share your information with multiple lenders.
- Improving Your Credit Score May Open Better Options: If your soft search results indicate unfavourable terms, you may consider improving your credit score before proceeding with a full loan application. Managing payments well, reducing existing debt, and avoiding unnecessary credit applications can help improve your score over time.
Conclusion
Soft search loans provide a convenient way to explore loan options without affecting your credit score, making them an attractive option for UK borrowers.
They allow you to get a clearer picture of the terms, rates, and amounts available to you before making a final decision.
While not a guarantee of approval, soft searches offer a useful starting point in your loan application process, helping you make an informed decision that suits your financial needs.