What is a Soft Credit Search?

If you are considering applying for a loan or credit card, then it is worth taking the time to make sure you fully understand the different search footprints that may be carried out by a potential lender: hard and soft credit searches.

If a soft credit search is carried out by a lender, then it means that it will disappear almost instantaneously from the person’s credit. This can end up becoming considerably important, especially if someone is struggling with a bad credit score. Why? Because it means that it won’t impact on their current credit file, and if they were turned down for a short term loan, it will not appear on this report which could otherwise affect their ability to get credit in the future.

What is a hard credit search?

To fully understand what a soft credit search is, you also need to be aware of how a hard credit search works too (also known as a hard footprint).

A hard footprint refers to a more thorough credit search that can take place when someone is making an application to borrow money. It will stay on the main applicant’s credit report for a minimum of 12 months, meaning other lenders in the meantime can see if you applied for a loan and whether it was approved or declined.

However, a hard credit search can last for different periods of time on a credit report. According to information provided by the credit reference agency, Equifax, a footprint may last up to:

  • 12 months for a basic application or quotation
  • Up to two years for a debt collection search
  • Up to six years for a fully funded loan. This is regardless of whether or not you default on payments or not. 

Why is a credit search carried out?

Whilst the type of credit search that is carried out can be dependent on the lender, in the majority of cases, it is a necessary step for most lenders.

By checking your credit file, through one of the three main credit reference agencies that are operating in the UK, they are able to verify important financial information about you. This includes the number of personal loans and payday loans you have taken out so far, as well as things such as if you have any outstanding loans, CCJs or IVAs on file.

All this information, which was discovered through a credit search, helps the lender to determine whether or not you are a suitable applicant for a loan or a mortgage product.

Can too many credit searches be a negative thing?

Yes, having too many credit searches appear on your credit file can end up negatively impacting your credit score. But why is that the case?

To lenders who may be assessing your eligibility for a loan or mortgage, too many footprints from direct payday lenders within a short space of time (such as within 1-2 weeks) may signal a red flag. It suggests you have been trying to aggressively gain access to money, and therefore may be seriously struggling with money.

As a result, this can lead some lenders to be less inclined to accept your application. As you could indicate a higher level of risk in terms of not being able to repay the loan on time, if at all.

In addition, too many credit searches could also be bad as it may suggest possible fraud. For example, this may happen if a large number of searches appear on your file within a 24 hour period, and it could suggest someone has stolen your card details.

For more information, see how to improve your credit score.

How many credit searches should I have on file?

Generally speaking, the normal amount of credit searches to have on your credit report is around 12 annually. However, don’t be fooled into thinking that having very few is better: it could indicate that you do not credit active, and lacking financial history may reduce your chance of getting accepted for credit in the future.

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