The Zopa soft search and your credit file

2 min • 21 Jun 2016
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If you apply for a loan, credit card or mortgage but get rejected, it can – in some cases – make you even less likely to obtain a deal elsewhere. This Catch-22 situation facing borrowers is due to the fact that formal loan applications are recorded on their credit files. However, the Zopa soft search can help you shop around, without leaving a mark on your credit file.

What does a credit file show?

Lenders check each applicant’s credit file before deciding whether or not to offer them a loan or card. This file shows details of the individual’s borrowing history, for example what credit they have had in the past and whether they managed to make all their repayments on time.

But it also shows the formal applications the person has made for credit from other providers. This is what can lead to problems: if the individual has made several applications within a short period of time, it is likely to indicate that they have been rejected again and again. As such, any new lender is likely to view them as an even greater risk – and may well turn them down.

How to avoid this trap

This means that when you are looking for credit, it is important to avoid multiple rejections appearing on your file. The good news is, there are a number of ways of doing this.

Check your credit file

Firstly, you can check your credit report to make sure it is in good shape before you start applying. Each of the credit-reference agencies (CallCredit, Equifax and Experian) can give you one-off access to your report for just £2 (although pay-monthly access is also available), while ClearScore and CallCredit’s new service Noddle lets you check for free.

These agencies can also help you see what sort of loans or other credit you might be eligible for, based on your credit score or the strength of your credit history.

Search safely

The other approach you should take is to make sure that any lenders you are dealing with use what is called a “soft search” when deciding if they are likely to accept you as a customer. A soft search means your credit history is checked, but no record of this search is left on your file.

In this way, you can find out whether you are likely to be accepted for credit – but if the answer is no, it will not affect your chances of getting a loan from another company.

Lenders might describe this sort of soft-search service as a “quick check” or (as in Zopa’s case) a “quotation check”. This will typically involve potential customers giving details of their income, other credit commitments and the reason they need to borrow, before an informal check is made on their credit report.

Moving on to a formal search

The lender will then be in a position to say whether or not they are likely to be accepted. At this point, the borrower can make a formal loan application – which will leave a mark on the credit report.

The benefit of having done the soft search in advance, however, is that this formal application is far more likely to be successful. When you’re looking for a loan, it is well worth dealing with companies which offer soft searches to avoid the problems highlighted above.

Find out more about getting a Zopa loan.

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