We are committed to responsible lending and so each time you apply for a loan with Sunny, we will perform a credit and affordability check. This is the case even if you’ve borrowed from us before. We will use the information you present us with to identify you, and then use that, along with information we receive from Credit Reference Agencies to confirm you not only meet our basic eligibility requirements, but that also you meet our other lending criteria. Then, we can approve you – or not – for a loan.
There are two kinds of credit check that we perform. A soft search, and a hard search. A soft search is designed to help you understand how likely you are to be approved for a loan, without affecting your credit score. Meanwhile, a hard search, which is usually conducted when you apply for credit, will impact your credit score. Here at Sunny, we use both kinds of credit check in different ways.
A soft search allows us to give you an indication of whether you are likely to be approved for a loan, without affecting your credit score. It leaves a mark on your credit report that only you – nobody else – can see, and so it isn’t taken into account when your credit score is calculated. A soft search is also called a quotation search; insurance companies usually perform these when you are looking at insuring something, such as your home or car, with them.
We use soft searches with first-time Sunny applicants to help them decide if they should apply for a loan with us. Using the information you supply and that which we get from your credit report, we can give you an impression of how likely you are to be approved by Sunny. If you’re not likely to be approved, then you won’t be able to continue. If you are likely to be approved, then you can decide whether to go ahead with your application or not.
A hard search delivers similar information to a soft search, but will register a record on your credit report that both you and other lenders can see. You may find that a new hard search record on your credit report causes your credit score to drop a little, however, this should recover in time, particularly once you start to make repayments on your loan. When a lender is considering your application they may factor in how many recent searches are listed on your credit report. If your credit report shows a number of searches in a short period of time, it may indicate to a lender that you are struggling financially, which is a red flag for them.
As even rejected applications will show on your credit report if a hard search is performed, it’s important that when you apply for credit, you do so only after careful consideration, which includes shopping around to find the best type of loan for your needs, from a provider who is likely to approve you.