These days, people pay much closer attention to what their credit rating is. Consumer awareness of credit scoring is much higher than it used to be and we can confidently say that at least half of people who contact us for the first time have already looked at their credit report online.
There are many different credit reference agencies out there. The majority of people looking to use these services will have heard of Experian or Equifax, but we recommend potential new clients to use Check My File for a 30-day free trial. After your trial ends, it will be £14.99 a month and can be cancelled at any time. This report “sweeps” several of those reference agencies and brings together the information into an easily understandable colour-coded report.
Often when customers get in touch, we receive questions about if we will be doing a credit search on them. This is because they are aware that too many searches can have negative effect on their credit score. Lenders always run credit checks but we always seek a client’s permission before proceeding with one. There are 2 different types of credit searches that banks can run on a customer: hard credit searches or soft credit searches.
A hard credit search is a detailed analysis of your credit report. Any financial institution carrying out one of these needs to be granted your permission to do so. Because the lender is looking into your situation quite closely with a hard search, if you pass the credit score then it’s fairly likely that your application will also be successful. This of course, is a big advantage.
The only thing that can really go wrong from that point going forward, is if for some reason you cannot provide satisfactory documentation to backup the information you have given them or it turns out you have provided false details.
The part that really stings about a hard search though is that it leaves a “footprint” on your credit file. This means that anyone who looks at your report in the future can see you have had a search carried out. This isn’t a bad thing immediately, but if you have several footprints registered in a short period of time then it could look like you applying for lots of credit at once.
The footprint left behind does not state whether your application was successful or not, though lenders’ systems could wrongly assume you are being declined on a regular basis. In their minds they would think “Why else would you go to lender number 2 unless lender number 1 had said no?”.
Leaving a hard footprint on your record every now and again is no big deal so there’s no need to worry too much about this, just be careful not to have too many within a short space of time.
A soft credit search is a much simpler approach towards analysing your financial situation. Soft searches are usually carried out on price comparison websites to give you an indication of what products might be available to you, or if someone wants to verify your identity.
Some mortgage lenders do soft searches in the first instance, with more lenders switching to this type of search. Whilst the financial institution doing a soft search obtains less information about you than if they had done a hard search, being granted an agreement in principle from one of these lenders is still a strong sign that your full application will be accepted.
The benefit of soft searches is that whilst you will be able to see that someone has carried out a soft search on you if you check your credit file, these searches are not visible to other Financial institutions like banks.
This means that you can apply for an agreement in principle for a mortgage with it being very unlikely that this would damage your credit score, no matter if it’s successful or fails.
If you are looking to make an offer on a property, we always recommend that you have your mortgage agreement in principle in place prior to contacting the estate agent.
You want to give yourselves the best possible chance of securing the property you want at the lowest price so if you can present yourselves as having your finances in place then you are definitely putting yourself in a better position going forward.
Having the agreement in principle also sometimes puts the agent off trying to “cross-sell” their own in-house mortgage services to you.
Specialist Mortgage Advice in Coventry by Coventrymoneyman.