Whilst ordinary credit checks may usually appear on your credit report, they are unlikely to affect your credit score. A soft credit search, on the other hand, is one that is not visible to third parties on your credit report.
Not all credit searches by lenders or third parties leave a visible ‘footprint’ on your credit report.
Sometimes, instead of making an in-depth search into your credit history, a lender or other company offering a financial product of any sort may decide to ask you to provide some information about your credit history.
What is a Soft Search?
You can think of a soft credit check as a sort of “glance” at your credit history. Soft credit checks provide an initial look at certain information on your credit report. Lending companies and other borrowers will initially performa soft search to gain some insight into how successful your application would be without conducting a full examination of your credit history.
Most importantly, soft searches aren’t visible to companies and don’t show up in your credit history. Therefore, they have no impact on your credit score or any future credit applications you might make.
Only you can see them on your report and it doesn’t matter how many of these searches there are.
The information that a lender might see in their soft credit search could include information used to identify you, as well as information used to determine affordability by the lender.
How does a Soft Credit Check differ from a Hard Credit Check?
While a soft credit search is based on information you’ve provided, a hard credit search is made by a third party. Organisations that make hard credit searches can include banks and other financial services, letting agencies and utility companies.
Soft credit checks aren’t visible to companies, but hard credit checks are. That means that soft credit checks won’t impact your score (no matter how many of them there are), while each hard credit check may lower your score.
By making a hard credit search, these organisations can go into your credit report and see if you represent a credit risk.
Can I Avoid Hard Credit Checks?
With some financial products such as mortgages and some loans, there is no avoiding a hard credit check, as the lender will want to do all the due diligence they can to ensure they’re lending to a safe and reliable candidate.
To minimise the number of hard searches on your report, you’ll simply need to make as few credit applications as possible. However, in order to ensure that the applications you do make have a higher chance of acceptance, you should try to only apply for credit that you’re definitely eligible for.
Ben Sweiry, co-founder of US loans connection service, Dime Alley, commented, “applying for a loan with Dime Alley will not negatively impact your credit score, as we use a soft credit check to provide you with an instantaneous answer as to whether you qualify. However make sure not to make too many applications within a short space of time, since this might look suspicious to other lenders.”