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

Whenever you apply for any form of credit – be that a loan, a credit card or a mobile phone contract – the lender will run a check on you with one of the major credit reference agencies.

That check will help the lender decide whether you represent a safe prospect and that you are likely to meet all of your repayments on time. Alternatively, if you have had problems in the past and perhaps have some late repayments, defaults or county court judgements on your file, then it is more likely that you will be turned down for new borrowing.

Such a search is often referred to as a “hard” credit check because it is an extensive and detailed look at your credit history and a record of the search is left on your file. In fact, every time that you apply for credit and a lender checks your credit record, that search is added to the record. And as a rule of thumb, the more searches there are on your file, the less likely it is that you will be approved for further borrowing.

Are you looking to apply for credit? Then read our “Ultimate Guide to Improving Your Credit Rating“. There is a specific section explaining how best to handle credit applications.

What’s a soft credit check?

A “soft” credit checks differ from a hard credit check in that it is not as extensive or as detailed. These searches are usually performed as background checks to establish identity (often by insurance companies or utility suppliers) or by lenders and comparison websites to give a borrower an indication of the likelihood that they will be approved for credit.

These soft checks are not full examinations of an applicant’s credit record and do not jeopardise that person’s chances of getting credit because the search is not recorded on the file.

Also known as a ‘’quotation search”, a soft credit check provides a snapshot of an individual’s credit standing to financial organisations when they come to look at that person’s record without leaving any footprint. Instead of a full search, the soft check considers certain key factors that influence an individual’s creditworthiness and extrapolates from this the likelihood of an applicant being accepted for a particular form of borrowing.

Where can I use soft credit searches?

Many of the major comparison websites use soft checks to give borrowers a good idea of whether they will be accepted for a new credit card or a loan. They present the likelihood as a percentage – “90% likelihood of acceptance”, for example – and this is often presented as a list of all the products that the applicant may be eligible for. Those products with the highest likelihood of acceptance are usually at the top of the list.

Who can benefit from a soft search?

People who’ve have credit problems in the past and are now actively working to repair their records are the most likely to benefit from soft credit searches. Such a search allows an individual with credit problems to see what financial options are open to them without risking damaging their rating with a hard search. Soft credit searches also allow borrowers to shop around to find the best deals with the lowest rates – something that may be particularly useful for those trying to repair their records who may still be facing higher interest rates than those with excellent credit records.

Why do I need to bother with this?

In recent years, lenders have moved from a rigid system, where those with poor credit records were rejected automatically, to something known as “rate for risk”. This system means that those with the best credit records benefit from the lowest interest rates while those with impaired records are likely to face higher rates on lending including mortgages, bank accounts, credit cards, loans, monthly car insurance and mobile phone contracts.

Every lender uses a credit score differently but generally applicants with the highest scores are more likely to get better rates because they are seen as lower risk.

But if you’re struggling to get a decent rate, you should resist the temptation to apply to one or more lenders advertising lower interest rates because these will be recorded as hard searches on your file. Instead, use a soft search to compare similar products from multiple lenders for people with your credit profile.