What is a soft credit check and why does it matter? 

When taking out a loan or a credit card, your credit history is thoroughly checked. There are two types of credit checks: hard and soft. They serve different purposes and have different impacts on your credit score.  

Credit checks are inquiries into your credit report that lenders make to know your past payment behaviour. You might have a strong income source, but it does not make it certain that you will keep up with payments. By analysing your credit report, lenders figure out whether you adhered to payments in the past or not.  

What is a soft credit check? 

A soft credit check is a type of inquiry that does not pull your credit points. It is just a background check of your credit history, often made for pre-qualification purposes. Here are examples of when soft inquiries are made: 

• When you examine your own credit rating 

• When a lender pre-approves your application (in the case of unsecured loans and mortgages) 

• When an employer runs a background check, it needs your prior permission 

• When insurance companies offer premiums 

• When landlords do background checks 

Not every time is your permission required to conduct soft checks, but they are not reported to credit bureaus. Therefore, they do not lower your credit score.  

What is the difference between soft and hard credit checks? 

Unlike soft credit checks, hard inquiries affect your credit score. Each inquiry pulls at least five points. Multiple hard inquiries can wreak havoc on your credit report. The following table reveals the difference between both types of credit checks: 

Aspects	Soft credit inquiries	Hard credit inquiries
Impact on credit score	No impact at all	Lowers your score temporarily
Purpose	Background check	Done for a loan approval
Visibility	Not visible to lenders	Visible to lenders
Consent needed	Implicit	Explicit

Why do soft credit checks matter? 

Soft inquiries are harmless. No matter how many times you check your credit score, it will never hurt your credit rating. Though borrowers find soft checks irrelevant, they still contribute to the health of your credit score.  

• They help you stay informed 

Checking your own credit score ensures that your credit report does not contain unidentified accounts and erroneous information that lower your credit score. You might be the victim of identity theft. It is impossible to know about errors in your credit report without checking it. If you find any errors, you can dispute them. Credit reference agencies take at least a month to fix them.  

• Soft checks enable pre-qualification 

Lenders often use soft checks to offer you pre-approval letters. If you are to apply for no guarantor loans or mortgages, you can receive quotes from multiple lenders. The comparison will help you find an affordable deal. Prequalification offers are made without extensive credit checks, and hence they do not affect your credit score.  

• They maintain transparency 

Soft checks are helpful to evaluate the risk involved. Knowing this helps you know whether you need to improve your credit score. You can know your past financial mistakes and avoid them in the future.  

• They encourage responsible borrowing 

With the help of soft credit checks, you can easily determine estimated interest rates, repayment terms and APRs. Though actual rates will be higher than this, there is still a possibility of adjusting your budget.  

What are the misconceptions about soft credit checks? 

Misconceptions to be dispelled are as follows: 

Soft credit inquiries are invisible 

Both hard inquiries and soft inquiries are recorded in your credit report, but credit bureaus maintain your credit report in two categories – consumer-view and lender-view. Lenders cannot see these inquiries. They are only visible to you. Soft credit inquiries do not help lenders to make a lending decision.  

Soft credit checks ensure approval 

Even though you have received a pre-qualifying offer, it does not imply that you will get approval from a lender when you formally apply for a loan. Lenders make an approval decision only after running hard inquiries.  

Soft credit checks do not matter at all 

Some borrowers assume that soft credit checks are worthless. They cannot help you in any way. The fact is that they can let you gain insight into how lenders will perceive you without affecting your credit score.  

The final word 

A soft credit check cannot change your credit score, but it can help increase your awareness about your current credit rating. They will help you know how likely you have chances of getting qualified for a loan. You can fix your credit score if you find that your credit report contains some erroneous information.  

FAQs 

Do small emergency loans require soft credit checks? 

Whether you are taking out very bad credit loans from direct lenders or small car repair loans, your credit score will be checked. However, if the loan amount is less than £500, lenders will run soft checks and make the decision based on your income sources. 

Who performs soft credit checks? 

Employers, lenders (in case of pre-qualifications), insurance companies, and landlords run soft credit checks. In fact, when you check your credit score, a soft inquiry will be recorded. 

Does Quickloanslender run soft checks? 

Yes, Quickloanslender makes soft inquiries in two cases: when you want to get pre-qualified for unsecured loans and debt consolidation loans and when you are borrowing a small emergency loan, which is not more than worth £500.  

How long do soft inquiries remain on your credit file? 

Soft inquiries remain for up to two years, but they are not visible to lenders. They do not hurt your credit score.  

Can you refuse soft checks? 

There are some cases when you can refuse it. For instance, your employer or landlord will have to get your consent to look into your credit report. It is up to you whether or not you consent, but withdrawing consent means struggling to find rented accommodation and a job with your employer.