MSE Creates Soft Search Loan Application
This week on the Martin Lewis Money Show, the Money Saving Expert himself spoke about getting loans during the Christmas period. Specifically, he mentioned the risks of making an application and the lender performing a ‘hard search’ on your credit report.
A hard search footprint is a mark made by the lender and sits on your credit file for at least 12 months and is a way of saying that they have checked your account. This information is important for other lenders to see so they can get an idea of how many applications you have been making. The premise is that by making several applications in a short space of time, it implies that you might have been turned down a lot and seem desperate for finance. There is also the possibility of it worsening your credit score.
The Soft Search
There is no reason why every application needs to be a hard search. After all, just because someone checks your credit file, it doesn’t mean that you credit record should suffer. This is where the ‘soft search’ comes in – which still allows lenders to see a credit file but it disappears quickly and makes no impact to their credit history.
For loans with a guarantor, there is always a soft search on the person who is asked to be a guarantor. After all, the application is not completely in their name and they are doing the borrower a favour by saying they will guarantee any missed repayments. Similarly, if you are applying for a loan, the lender may perform a soft search on your spouse, to see if there are any credit problems or defaults. But since your spouse never applied, a soft search is a nice way to check their credit history without causing any negative impact.
Introducing the Soft Search Application
MoneySavingExpert have created a soft search loan application, which asks the same questions you will find in a typical loan application such as name, age, address, employment status, annual income, monthly rent or mortgage payments. However, rather than the lender giving you a hard search on your credit file and potentially declining your loan, this handy tool created by MSE will give you an idea of what loan companies are the right fit for you.
For instance, if you have a good credit rating, they may recommend an unsecured loan with low rates from the likes of Zopa, Sainsburys Bank or Barclays. However, if you have a less than perfect credit score, they may recommend a credit builder credit card, credit union or product which requires added security such as a guarantor.
This puts the applicant in a much better position to decide what loan is the right one for them. Borrowers can avoid having lots of credit search footprints on their file and also spending lots of time going back and forth with different applications and lenders, trying to secure the loan they need.
Other Smart Saving Tips
Some other things mentioned in the MSE show this week included a clever tax relief for married couples. An individual gets a personal tax allowance for the first £11,000 that they earn. But these allowances can shared across a married couple, provided that one is not working (non tax-payer) and the other is a basic-rate tax payer (earning between £11,001 and £43,000). The annual allowance for 2016 is £212 and you are able to back-date to last year too, which was £220, allowing couples to make a saving of £432 This tax relief is eligible to £3.2 million in the UK, so if you haven’t already, get on it!