Increasingly, financial services companies are offering the option to conduct a soft search or “smart search” to establish your chances of being approved for a loan or credit card. If you’re not sure what a soft search is, then you’re not alone. Here’s our ultimate guide to soft searches for credit, and the reasons why these could be important for you.
Credit Score
Perhaps the most important thing about soft or smart searches is that they will not leave any mark on your credit file, unlike a “hard search” which is an actual application for credit. If you are turned down by one lender, this can make another lender less likely to accept you too. The more searches you do, and the more often you are knocked back, the harder it gets to obtain credit. Even if your credit score is healthy, a soft search could stop you applying for products which just aren’t designed for people like you.
Most of us when comparing financial services products such as credit cards or mortgages default to the provider with the lowers interest rates. The problem is that those products which offer a very low interest rate are generally only available to people who have the best credit scores. By applying and being rejected, the failed application will be logged on your file and make it harder to get other finance approved.
How Does a Smart Search Work?
Many sites, especially the large comparison sites, offer tool which is often marketed as an eligibility checker on their websites. Typically, you will be asked to input a few basic details such as your name, address, date of birth and what you do for a living. The information is then used by a credit referencing agency for a soft search. Usually, the results will be reported as a three-digit number, which is your credit score. The website can then suggest which products you might be more likely to be accepted for and will filter out the ones which are not right for you. Every site is different, but you will probably see a mark out of ten, or a percentage result against each product. A high score such as 8/10 or 95% indicates that you have a good chance of acceptance.
Soft searches aren’t an absolute guarantee though, so there is still the chance you may be rejected when you click through to the lender and make a “hard” application. Each lender has their own rules for making a loan and will look at not only the information on your credit file but also the information you have given on your application form to make a decision. The criteria for lending change regularly, and frustratingly, the lenders don’t have to give a reason when they reject you for a mortgage or credit card.
Increase Your Chances of Acceptance
As well as conducting soft searches to maximise your chances of being accepted, it’s also a good idea to understand your credit score and monitor it regularly. Lenders want to see you as a good risk, someone who will pay up on time, in full, and wont default on the agreement. Doing things like closing dormant accounts you are no longer using will have a positive effect on your rating, as will paying off old debt and getting into the habit of never missing a payment on any loan or credit agreement. Sometimes, the reason people are rejected is that there is a mistake on their file. If that applies to you, then you have the right to have it put right. You will of course need the paperwork to prove the mistake though.