How to compare loans without damaging your credit rating

Last post: Jan 12, 2018

Requesting a quote for a loan can result in damage to your credit report. When lenders carry out “hard” checks, it leaves a mark on your credit file. Too many of these can damage your rating overall. Here’s how to avoid the issue.

 Shopping around is the smart way to pay less for the things you need. From cars to new desks, doing your research, comparing the market and identifying the best possible deal for your particular circumstances is smart – and it could save you a packet.

However, when it comes to personal finance, "shopping around" for loans could actually damage your finances. This is because of the "hard" checks many lenders carry out when asked for a personalised quote.

Because many lenders' quotes are based on personalised information about your credit and your credit history (i.e. Do you have a history of missed repayments? Have you got a good track record with credit cards? Etc.), they need to delve into your credit report to mine the information required to weigh up risks and deliver an accurate quote.

However, when these hard checks are completed, they are noted on the report itself. If you shop around and many lenders see you have been sourcing quotes from multiple sources, it may indicate to them that you have been recently unsuccessful in seeking finance. If other lenders won't lend to you, why should they?

It's an unfortunate system, but it isn't entirely inescapable. If you want to source quotes from lenders but don't want to damage your credit report, consider the following points:

  • Be aware of hard vs. soft searches
    Lenders should make it very clear whether your request for a quote will result in a hard or soft search (soft searches won't damage your report). If you're unclear, make sure you ask before the check is carried out.

  • Use comparison tools
    Many of the mainstream comparison tools use soft searches to give you a reasonable idea of the rates you can expect to be offered by different lenders, before you go ahead with a hard search from the lender offering the best deal.

Seeking a secured loan, tailored to your financial needs? We can help match you with the best possible option, without damaging your credit rating. Contact our team to find a solution that fits you perfectly.