It can be more than a little confusing when you start looking at consumer loans. The language can be difficult to understand and at the front of the mind of most adults is the concern that they’ll damage their credit score if they apply and get turned down. Not every adult has an excellent credit score, making it all the more important to be aware of terms like soft search and what they mean for you.
Today we’re going to give you a quick rundown of these phrases and why they matter.
Let’s start simple: What a search is
As you might imagine, a loan is declined or accepted based on information about your financial history and present situation. The more information a lender or broker can work with, the better they’ll be able to make an informed and reasonable decision on who to help.
A search is simply a way to get this information. It’s often referred to also as a credit check and is when a company reviews information relevant to your loan application – particularly your credit report, which includes your history of borrowing money. Some searches can draw on soft search technology, while others won’t. It’s important to clarify whether a loan provider or broker uses soft search before you make an application with them.
Sounds good. So, what’s a soft search?
The easiest way to think about a soft search is as an initial check that doesn’t cover your entire available history and borrowing information. It means that a broker or lender will take a look at more basic details about you, but they won’t actually look through all the details of your credit report at this stage.
This is helpful because it allows a lender or broker to make an initial call on an application without making an impact on the customer’s credit rating – or a much smaller impact. Compared to a ‘hard search’, a customer making requests to several lenders or brokers could significantly affect their credit score. This doesn’t happen with a soft search; you can do as many applications as you like without worry.
Examples of soft searches are doing checks on your score and credit report via well-known websites like Clear Score, or when you are going through an identity check.
What’s a hard search, then?
As you’d expect after what we just covered, a hard check is a fuller and more comprehensive check of your credit score or report. It lets the lender or broker make a fully informed decision about your application – an important thing, as loan application decisions are based on complicated and sophisticated sets of criteria that need a lot of information to work properly.
While it can vary, it’s normal for a hard search to remain on your report for a full year, likely impacting your score negatively if your application was declined.
Examples of a hard search include when you are trying to buy a house and need to have your credit report fully reviewed for a mortgage application. Credit card applications are the same too, as they are a significant decision that needs to be made based on as much data as is available.
Clearer now?
We hope that helps! This is an important and useful thing for an adult to know and we don’t think it’s too scary once you get the basics down of what a hard or soft search is. With this information behind you, you’ll be free to make more informed and financially responsible decisions when considering a loan.
