Credit checks are something you’d be familiar with if you have ever applied for credit. Lenders will run a credit check on your credit history when you apply for credit. Two types of credit checks are common: a hard inquiry or a soft inquiry. However, a credit check can harm your credit rating.
Learn more about credit checks and how they affect your credit score.
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What’s a soft credit screening?
Soft credit checks are inquiries into your credit reports initiated by either you or an organization conducting a background check. Financial institutions use soft credit checks to evaluate applicants who offer pre-approval for credit.
A soft credit check doesn’t leave any trace on your credit report. Based on your credit history, outstanding debts, and credit history, your credit score allows lenders to assess your creditworthiness.
Can I borrow soft credit check loans?
Normally, once you accept an offer from a lender based on your soft credit check, it is then that they run a hard credit enquiry into your credit file. Remember, an FCA-authorised lender will always put your credit history through a formal credit check. If they don’t do so, it would be best for you to check their authorization on the FCA’s Financial Services Register.
The difference between a hard and soft credit check
A creditor or lender may request a credit inquiry into your credit report via credit bureaus. This may be recorded on your credit file as part of your credit history. The impact of this inquiry will depend on whether it was a soft or hard credit check. These are the differences:
Hard credit checks: This is an inquiry into your credit report by a lender. This is a check that lenders, mortgage providers and credit card companies do to evaluate your credit history. Credit reports contain details of your credit history, default details, credit accounts, public records information like CCJs or decrees, as well as details about your account provider. Hard credit checks can leave footprints on your credit file that may stay for up to 2 years. This may temporarily lower your score, but it’s not something you can’t recover from. You can still improve your credit score by paying your debts regularly.
Soft credit inquiry: A soft credit inquiry is not limited to credit applications. Do you remember the credit card offers that were sent to your junk mail? These offers are based upon soft credit checks. A soft check inquiry is made whenever you ask for a copy from a credit bureau or when potential employers run a background check. Although all soft credit inquiries are recorded on your credit reports, they are not visible to everyone. Soft inquiries are not linked to applications for new credit. You can be assured that this inquiry will not affect your credit score. This inquiry is not for dispute and is meant to be used as a reference or pre-approval.
How long does an inquiry stay on your reports?
Hard credit inquiries into your report typically stay on it for approximately two years, accompanied by a slight decline in your credit score. On the other hand, soft inquiries don’t count towards your credit score as a negative item and are not visible to all inquirers. Credit scoring models don’t consider soft inquiries because they aren’t related to credit applications.
Can I remove credit inquiries from my report?
It is a good idea to look into any hard credit inquiries in your credit report related to credit you have not applied for. For hard inquiries that you do not approve, you can file a dispute. This could indicate identity fraud, where someone has used your identity to obtain credit. Here’s when you can dispute a hard credit check:
- It was initiated without your knowledge.
- You did not approve it.
- Your credit applications and the number of inquiries don’t match – with a significant difference.
- Someone pressured you into agreeing to the inquiry.
Tips to better manage your credit inquiries
These are steps you can take in order to manage your credit inquiries better:
- Only apply for credit when you really need it. You should not apply for credit just to look at the possibilities. This could lead to negative points on your report and lower your score.
- You should leave a healthy gap between credit applications, at least 30-45 days. Try to get loan offers quickly if you are looking to shop for them.
- Regularly check your credit reports. You can raise a dispute if you find an error or an unrequested hard inquiry.
6 Tips to Borrow Soft Credit Check Loans
- You can’t afford to leave anything undone when it comes to improving credit scores. Pay utility bills, register on electoral rolls, settle outstanding debts, and so forth.
- Keep your credit utilization ratio low, ideally less than 30% of your credit limit.
- It is important to pay off the loan quickly. The longer the term, you will be paying more each month.
- Allow gaps between each application. This protects your credit score against the damage that multiple credit checks can cause in a short time.
- You can check your credit score to see if there are any discrepancies. Correcting these errors could greatly improve your credit score.
- Verify that you are dealing with an FCA-approved lender. To verify that your lender is legal, you can use FCA’s Financial Services Register.
Conclusion
Soft credit check loans are essentially loans that lenders offer to you based on a soft credit enquiry into your credit file. Although, once you accept the offer, the lender will run a hard enquiry to assess your creditworthiness and repayment ability. So, it is best to understand the terms and conditions before opting for soft credit check loans.
