When you apply for a loan, most lenders will need to perform a credit check on you before they can tell you if you qualify. While this won’t necessarily affect your credit score, the search can show up on your credit history if your chosen lender decides to check your credit using a ‘hard’ search. This will leave its mark and other lenders will be able to see this when you apply for a personal loan elsewhere. Soft search, on the other hand, doesn’t display this information to lenders. If lenders see that you are frequently searching for loans, it will most likely affect your chances of getting a loan.
- 1 What Is a Credit Inquiry?
- 2 What does ‘Soft Search’ mean?
- 3 What’s Wrong with Searches Appearing on Your Credit File?
- 4 How do Soft Search Loans work?
- 5 Will I be accepted for a Loan after my Soft Search?
- 6 What if I’m constantly being rejected for Loans?
- 7 Shop around for Personal Loans
- 8 Compare your offers with Other Credit Options
What Is a Credit Inquiry?
Whenever a person applies for a loan, a formal request is raised by the lender to credit reporting agencies to check the credit score of the applicant. This process is called a ‘credit inquiry’.
There are two kinds of credit inquiries:
Hard Inquiry (Hard Search)
This is when a lender checks your credit ratings before dispersing the loan, it is called a ‘hard inquiry’. Hard inquiries normally have a negligible impact on one’s credit score. But if several requests are raised within a short period, hard inquiries can bring down your chances of procuring a loan. Hard inquiries also negatively impact credit scores when a loan application is denied multiple times.
Soft Inquiry (Soft Search)
When an individual’s credit rating inquiry is made as a part of a background check, it is called a ‘soft inquiry’. An inquiry initiated as a part of a soft credit check auto loan has no impact on a person’s credit score.
What does ‘Soft Search’ mean?
Soft search loans are also referred to as ‘quotation search’. It means a lender can check your credit history without viewing the soft search loans attempts you have been trying for on your credit file.
It’s different from a hard search, which is recorded and can be seen by other potential lenders on your credit file for at least 12 months.
This allows you to search for rates and compare offers without it affecting your chances of receiving financial advances in the future.
What’s Wrong with Searches Appearing on Your Credit File?
When your credit file records several searches in a short space of time, potential lenders will look at this negatively. This is because it can be linked to a number of reasons that might indicate that you’re a risky person to lend money to.
So, if you’re just looking for loan offers but aren’t ready to apply, you can search for soft search loans and it won’t affect your existing credit score.
How do Soft Search Loans work?
Carrying out a soft search loan usually requires filling out an application form. This is because to run a soft search, the credit lender or broker will need your personal details to find out your credit history. They’ll then show you offers you could potentially be eligible for based on the information you’ve given.
Will I be accepted for a Loan after my Soft Search?
A soft search loans result just shows your suitability for the loan or credit. It doesn’t guarantee you’ll pass the hard search. Soft search scoring systems can vary.
If you decide to go for a product based upon a successful soft search loan result, you’ll need to agree to the lender running a hard search on your credit file.
What if I’m constantly being rejected for Loans?
If your soft search loans results aren’t showing you any offers that are right for you, there are a few things you can do.
First, you can apply for a copy of your personal credit file and look to see if there are any errors. Errors on your credit file can influence your search results, so it can be a good idea to check if the details on there are correct.
You could also work on improving your credit score. A better credit score may improve your chances of being accepted for a loan.
Shop around for Personal Loans
With your pre-qualified online offers in hand, compare the loan amounts, monthly payments, and interest rates. It’s recommended to shop for loans from a local credit union or bank. Credit unions may offer lower interest rates and more flexible terms, especially to borrowers with bad credit. They’re also your best shot for a small loan.
Compare your offers with Other Credit Options
Before you choose a personal loan:
See if you qualify for a 0% credit card.
If you have good credit, you can probably get a credit card that has 0% interest on purchases for a year or longer. If you can repay the loan at that time, a credit card is your cheapest option.
Consider a Secured Loan.
If your credit isn’t great, you may get a better interest rate with a secured loan. You will need collateral, such as a car or savings account. If you own a house, a home equity loan or line of credit can be significantly cheaper than an unsecured loan.
Add a co-signer.
A co-signed personal loan may be an option for borrowers who don’t qualify for a loan on their own. The lender considers the credit history and income of both the borrower and co-signer in approving a loan and may offer more favorable terms.
Availing a loan can help you relieve your debt and cover unexpected costs, but be sure to review all your options before settling on one choice. Find the lowest rates and borrow only what you need, and be prompt with your repayments.