Soft Credit Check Loans vs. Hard Credit Check Loans: What’s the Difference? 

When applying for a loan, two terms, “soft credit check” and “hard credit check”, grab your attention. This is regarding how the lender assesses your application to decide whether or not to approve loans. Your actual financial situation is a key aspect used in these assessments.

Soft and hard assessments are done at different stages of loan processing. They are different from each other and serve a completely different purpose. Therefore, if you are searching for a soft credit check loan in the UK, you may not find any such loan.

This might mean that you can receive a pre-approved offer after getting through soft checks. Delve deeper to find out the points where a loan with a soft credit check and a hard check differ.

What do you actually mean by a credit check?

This is the process of reviewing your credit report by a lender, bank, or any financial institution. Such assessments help analyse your financial behaviour. A few things that are unveiled after credit checks are:

• Repayment history
• Records about previous loans
• Payments that may be outstanding
• Electoral roll information
• Ongoing credit commitments
• Defaults or missed payments

All these details help the lender to estimate the likelihood of getting loan payments on time from borrowers. These assessments are done in two ways, i.e. soft credit checks and hard credit checks.

What is a soft credit check?

This is an initial assessment done to understand your affordability. Credit reports are not required at this stage, as bank statements and documents showing how you are managing your current payments will be assessed.

When is a soft credit check performed? It is done at the time of:

• Loan eligibility checking
• Pre-qualifying process
• Initial checks revealing affordability
• Providing personalised loan offers

What to expect after soft credit checks?

• No visible impact on credit scores
• Not reflect on your credit report
• Lenders will not be able to recognise such checks
• Allows assessing eligibility of the borrower
• Completes within a few minutes
• Helps in drawing comparison of loan offers

What is a hard credit check?

This is a detailed assessment of your credit report done after you have submitted your loan application to the lender. This is conducted to finally decide if you should be given a loan.

These checks will reflect in your credit records. Therefore, you need to be doubly sure of the loan agreement, after which such checks will be performed. This assessment will leave a negative imprint on your credit scores.

When you apply for a personal loan, a credit card, a mortgage, car finance, or a business loan, etc., the lender carries out a hard search. This way, they make sure about the approval decision.

Soft credit check loans Vs Hard credit check loans

The table below will show a better way to understand the differences between these two these loans.

Which credit check is better for me?

You cannot choose between them, as both serve different purposes. A soft credit check is designed to help you understand if you can pre-qualify for loans. Based on your pre-approved offer, you can decide if you should sign the loan agreement. After this, a hard credit check will come into play to assess if you should get approval for loans.

The best approach is to start with soft searches to understand which offer holds the best rate for you. Such loan proposals also help you determine monthly payments, total cost and total repayment amount. Use these soft checks to find the best offer so that you just have to face a hard check once.

You can check and find lenders who let you avail of these facilities. Making an informed decision will be possible then.

The bottom line

You might be curious to know if get approval for loans for bad credit from a direct lender. In that case, you must know that this may be possible, as these loan providers consider applicants with less-than-perfect credit scores.

However, approval cannot be promised, as the lender has to assess your affordability, income, existing debts, and their eligibility criteria. If you can convince them of your repaying potential, getting approval is not going to be tough. For them, repayment assurance plays a key role, and your affordability will be a significant factor here.

FAQs

Is it possible for me to get a loan with only a soft credit check?

No, a soft search is done before pre-approval. This finally leads to getting a free quotation that unveils information about interest rates, loan term and borrowing amount. To be able to qualify for final approval, you must go through hard checks.

How long does a hard check stay on my credit records?

Once hard checks are done, your credit scores will drop temporarily. This information will stay on your credit reports for around 12 months. However, the overall duration of stay might differ depending on the credit reference agency.

Can I apply for multiple soft credit check loans?

Yes, you can go through multiple soft searches. These will not reflect on your credit report. Therefore, your credit scores will not be affected because of soft assessment. This allows you to compare different types of loan offers obtained from different lenders at the same time.

How many hard credit checks will be allowed?

Within a 6-month duration, you can make two to three formal applications. If you exceed this maximum limit, the lenders will not be interested in accepting your application. Try to make an application by maintaining a safe time window.

Will checking my own credit scores hurt my credit rating?

No, when you verify your credit scores through soft eligibility checks, your credit history will not be hurt. This will be treated as a soft search on your financial profile. You must review your credit scores from time to time.

John Milton

John Milton is an experienced financial writer and personal loan expert with years of experience identifying the right category for people. He has been Chief Financial Expert at LoanChester in the UK and provides insights on the big deals of the lending institution. He is known for transforming the loan policies as per the unique needs of different borrowers. First, he focuses on what the borrowers require according to their favourable and adverse financial stances, and then he focuses on making a variety of personal loans affordable. John writes well-researched content on personal loans and also guides borrowers regarding their unique financial conditions. John holds a Ph.D. degree in banking and finance.