Soft vs hard credit searches

Understanding the difference between hard and soft credit searches is crucial to understanding how your financial behaviour affects your credit score. Alastair Douglas, CEO of TotallyMoney, explains

Searches, or credit checks, are when an individual or organisation looks at your credit report to find out about your borrowing history.

Financial organisations will do this before deciding whether to lend you money, and at what rate. Energy providers and mobile phone companies will also check your credit score to decide what kind of product to offer you, if any at all.

Both hard and soft searches can be carried out using any of the UK’s three credit reference agencies: Callcredit, Experian, and Equifax.

Soft searches

Soft searches reveal a limited amount of information and don’t leave a mark on your credit file. If you check your own credit score (which you can do for free with TotallyMoney), that counts as a soft search.

The same goes for a search that is purely for the purposes of verifying your identity or any search carried out as part of a pre-employment background check.

Soft searches are also carried out when a lender or price comparison site checks your eligibility for a certain product, such as a credit card or loan. It doesn’t matter how many soft searches are carried out. Only you can see them, not prospective lenders, and they don’t harm your credit rating.

Hard searches

Hard credit searches, on the other hand, are a different ballgame entirely.

When a lender carries out a hard search, it will take a full look at your credit history, and this will leave a mark on your report. Hard searches are carried out when you apply for a financial product such as a loan, credit or store card, or mortgage, as well as when you apply for pay-monthly mobile phone or energy contracts.

Hard searches are visible to other lenders carrying out a hard search on your credit report, and these searches stay on your report for 12 months. This is important to keep in mind if you’re planning on applying for a mortgage anytime soon. It’s best to avoid credit applications in the 12 months before you apply for a mortgage, if you can.

Why does all this matter? Well, if you apply for several forms of credit in a short space of time, it can make you look desperate or as though you’re struggling with your finances. Lenders are wary of desperate or struggling borrowers, and may either charge you a higher-than-average interest rate or turn you down altogether.

Eligibility checker

For this reason, it’s always best to apply for products you have a good chance of being accepted for. TotallyMoney has a credit card eligibility checker that carries out a soft search on your credit report. It uses this information to recommend cards you’re most likely to get.

So, if you’re concerned about how credit searches are affecting your credit rating, there are two things you can do:

1) use an eligibility checker before you apply to see how likely you are to be accepted for the product you want;

2) check your free credit report regularly to monitor your credit searches. Try to make sure previous hard credit searches are no longer on your credit report before you apply for new credit.

Click here to find out why it’s important to check your credit report


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