Soft Search Loans for Bad Credit

Updated: October 07, 2024 Author:

Key Takeaways: A soft search provides a general overview of your credit report to lenders.

The main purpose is to assess how likely you are to be able to make your repayments without experiencing hardship.

What is a soft search for bad credit?

Soft searches provide a top-level view of your credit report and an insight into whether your credit score is likely to make you eligible for a specific loan.

The advantage of soft search credit checks is that they can be carried out without leaving an entry on your credit files.

This is in contrast to more in-depth ‘hard’ credit checks which, if they lead to a loan being denied, can lower your credit score. 

Finding out if a loan is likely to be approved is a good way to avoid being refused a loan.

This allows you to plan accordingly and put a budget in place that will enable you to meet your monthly repayment schedule without experiencing hardship.

Exactly what is needed if you want to make a smart financial choice that will help you improve your situation over the long term. 

Ignoring the affordability of a loan, and focusing solely on getting approved for as much money in the shortest period of time, will cause hardship sooner rather than later.

If you have to go without or borrow additional money simply to meet loan repayments, you don’t get the full benefit of the loan.

It can also cause a snowball effect where you’re taking out more debt to service your existing loans.

These kinds of situations can place a large amount of stress on you and cause you to act against your best interests.

A measured, more strategic approach will always help turn things around in a much shorter time. 

What is the difference between a hard and a soft credit check?

After a soft check is carried out to assess likely eligibility, a hard check is typically performed.

This is part of the process that many lenders use to carry out Responsible Lending practices and is in the best interests of the person taking out the loan.

One of the key things to note about a hard check is that if it results in you being declined, it can hurt your credit score.

Hard checks can also lower your credit score if you have multiple loan applications within a short period of time. 

Rather than getting lost in the details, it’s far more useful to focus on affordability: 

  • An affordable loan is one that you can repay without enduring undue hardship 
  • Affordability is the most important criteria to consider because it will show you that, while you’re still borrowing, you are living within your means 
  • Affordable borrowing is the fastest, most reliable way to get back on your feet and turn your financial situation around 

What does a soft check for bad credit really do?

Soft checks will typically require you to provide evidence that the repayment schedule you are looking to set up is affordable. Here are some key pieces of information that go into making this decision: 

  • Recent bank statements: This allows you to show the lender how much money you have entering and exiting your accounts, and what it is typically spent on. Lenders will be looking to see that you can meet your repayments without exposing yourself to the need to borrow to cover your other outgoings
  • Stable employment: Having a salaried position or a long-term contract with a high income will increase your chances of being approved. This is because you can show that you are likely to have a level of income that won’t dip or stop entirely. Soft search loans for self-employed people with bad credit will typically offer less favourable interest rates as your income can be more volatile 
  • Regular expenditure: Having to pay a mortgage, child support, credit cards, or other loans will all eat into your monthly pay packet. These types of agreements cannot suddenly be reduced like your shopping bill, for example. Lenders will take them into account to see how much you are obligated to pay each month 

By weighing up the contribution of these various factors, a lender can get a much clearer idea of how affordable the intended loan is. 

Will a soft check help me get an affordable loan?

While having a soft check carried out is never a guarantee of a loan being granted, it will help ensure that any loan you are given is affordable.

It’s important to beware of promises of guaranteed loans that give you access to cash in an hour or less.

These types of agreements are typically granted with little or no checks on you – which is how they are guaranteed – and therefore do not assess the loan’s affordability. 

Just because a lender appears to be cutting the red tape out of the way so you can try to get back on your feet financially again, doesn’t mean they have your best interests at heart.

Without taking into account the affordability of repayments, your situation can worsen, which is why the FCA stresses the importance of affordability with lenders.

How can I get approved for a loan with bad credit?

The key point here is to apply for a loan that you know you can repay without having to go without any of the essentials in life.

Here are three things to consider before you even apply and a soft search is carried out: 

  • How much of your monthly budget can you afford to divert towards a long-term repayment schedule?
  • Are you able to put down collateral, or ask a family member to be a guarantor, so that you’re able to borrow more on a lower interest rate?
  • Are you being promised something that sounds too good to be true?

Treat any loan with the same budgeting advice applied to large loans with bad credit by calculating the total cost of all debts combined.

Ideally, with a 50/30/20 budget, you’ll have 50% of your income meeting your living costs, 30% for things you may want to pay for – like a haircut, new pair of shoes, or work interview clothes, and the remaining 20% being used to pay down debts, or split between debts and savings.