The lenders who won't damage your credit score

Updated: 
Some lenders will let you know whether they are likely to approve you for a credit card or loan without leaving so much as a mark on your credit record.

The main problem with applying for most loans and credit cards is that applying leaves a mark on your credit record straight away, whether you're accepted or not.

That's why, if you make a few applications in a short space of time, lenders will be less likely to lend to you. They seem to believe it's a sign you're desperate, rather than someone who is sensibly shopping around!


The second problem is that you go through the time and effort of submitting all the detailed information they need about you to find the offered rate is either too high or you were rejected.

Most frustrating. A soft check can require less information and paperwork, and you can put off reading the bulk of the small print until you're more confident of being accepted.

Six lenders claim to be different
Six personal loan and credit card providers stand out by allowing you to do quotation searches as standard. These "soft searches" of your credit record don't leave a mark, unlike the full searches.

You'll then be given a quotation – an indication as to whether you'll be accepted – as opposed to a full offer.

Loans with soft searches
Here are the loans that come with soft searches as standard:

Loan

Interest rates

More

Zopa Loan

At least 5.3% over three years

At least 5.8% over four years

At least 5.8% over five years

Repay early in part or in full with no penalty

Nationwide Personal Loan

At least 5.9% for current-account holders

At least 6.2% for non-account holders

N/A

RateSetter Loan

At least 6.9% over three years

At least 7.6% over four years

at least 7.4% over five years

Repay early in part or in full with no penalty

encash

See below

Repay early in part or in full with no penalty




The figures in this table are based on £7,500 loans. Shorter loans are usually, but not always, more expensive. If you want to borrow less money, you will normally be asked to pay more. Nationwide, for example, charges at least 11.9% for loans of £3,000. You can quite often get the same rates up to £15,000, however.

encash works quite differently, not least in that it lends to a wider range of profiles than most lenders (from A* to E grade borrowers). This is probably what prohibits it from giving a representative APR like the others in my table, since the rate has to apply to half of its borrowers. It told me that the average rate – not the lowest rate – between all its borrowers of all grades is 13%.

Most of these rates are competitive. For comparison, the cheapest five loans of this size on the market all cost5%-5.1%, through Derbyshire Building Society, Sainsbury's Bank, Clydesdale Bank, Barclays and Tesco. None of those lenders offer soft searches, even if you ask them nicely. To see the most competitive loan rates head to The cheapest personal loans

Don't get caught out: Nationwide's trading divisions, such as Derbyshire Building Society, do not offer quotation searches, even though they often have the best products in the group.

Only people with fantastic financial profiles should expect to receive the interest rates shown in the table. Everyone else will either be rejected or will probably be asked to pay far, far higher interest rates, and you should then be asking yourselves whether the cost is simply too much.

Zopa and RateSetter will lend to really great borrowers only.

Credit cards with soft searches

Card

Balance transfers

Purchases

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Barclaycard*

0% for 26 months

3.5% fee

0% for 6 months

N/A

Fluid Credit Card

0% for 24 months

2.9% fee

0% for 3 months

N/A

Nationwide Select Credit Card (for c/a holders)

0% for 20 months

3.1% fee

0% for 12 months

0.5% cashback on all sterling purchases

Unlimited commission-free purchases abroad

Nationwide Credit Card(1)

0% for 20 months

3.1% fee

0% for 3 months

You have to spend to earn commission-free purchases abroad

Fluid Credit Card

0% for 15 months

1.5% fee

0% for 5 months

N/A

Barclaycard*

0% for 7 or 14 months depending on your profile

2.9% fee

0% for 7 or 14 months depending on your profile

N/A

Nationwide Credit Card (2)

N/A

0% for 6 months

You have to spend to earn commission-free purchases abroad



*Barclaycard has many other different cards available, all with soft searches.

All these deals are either table-topping cards or pretty close.

Not all soft searches are equal
There are no guarantees of success even after getting a positive soft quote.

Most of these lenders write on their websites that you're "likely" to be accepted if the soft search gives you a positive result. Michelle Slade from Nationwide also told me: "It is fair to say that the majority of people who go on to fully apply for a loan get the indicative rate from the soft quote."
After doing a soft search with Barclaycard, it will then tell you the percentage chance of being accepted after a full search.

Those trying to borrow from RateSetter have nothing to fear. The company tells you whether you're accepted without doing a hard search. Although the credit reference agency might ultimately oblige RateSetter to do a "hard search" before lending to you, RateSetter will only do so after you have accepted the quote, and the quote won't change as a result.

Zopa is similar. A spokesperson told me: "We don't change an applicant's quote. What they receive initially as a personalised (soft search) quote is what they get as a final APR."

Non-standard soft searches
In theory, any lender can do an ad-hoc soft search, but I've contacted building societies, banks and supermarket banks, and not one has yet revealed that it's willing to do a soft search even if you specifically ask for it. They all said they didn't do so, except a few who didn't answer me at all.

Discussion board users report having no success persuading them either. However, your own bank might pre-approve a loan based on your records with it. This is quite common, although presumably less so in these times, when banks are being more cautious about who they lend to.

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