What Is The Difference Between Hard and Soft Footprint Credit Checks?

by | Wednesday 18th Oct 2023 | Mortgage Insights

Hard Vs. Soft Footprint Credit Checks

Hard Vs. Soft Footprint Credit Checks

When it comes to getting a mortgage, understanding the nuances of credit checks is paramount for borrowers seeking new home finance. Recent developments from Barclays Bank have brought significant changes to the credit checking process for mortgage applicants. In this article, we will explore the distinction between hard and soft footprint credit checks and delve into Barclays Bank’s recent shift towards soft credit checks at the Decision in Principle stage.

Hard vs. Soft Footprint Credit Checks

Credit checks are an integral part of the mortgage application process, serving as a tool for lenders to assess a borrower’s creditworthiness. Two primary categories of credit checks exist: hard footprint and soft footprint.

Hard Footprint Credit Check:

– A hard footprint credit check, also known as a hard inquiry or credit application, involves a comprehensive examination of a borrower’s credit history.

– It is typically conducted when a borrower submits a formal mortgage application.

– Hard checks leave a visible mark on the borrower’s credit report, potentially impacting their credit score and indicating that they are actively seeking credit.

– Multiple hard checks in a short period can raise red flags for lenders, as it may suggest financial instability.

Soft Footprint Credit Check:

– A soft footprint credit check, also called a soft inquiry, is a less invasive examination of a borrower’s credit history.

– Soft checks are usually performed for pre-qualification purposes, such as the Decision in Principle (DIP) stage, and do not impact the borrower’s credit score.

– These checks are often used by lenders to provide initial lending decisions without the borrower’s credit file being affected.

– Soft checks offer a less intrusive way for borrowers to assess their eligibility for a mortgage.

Barclays Bank’s Recent Shift to Soft Credit Checks

Barclays Bank recently announced a significant transformation in their mortgage application process. According to the official statement from the bank:

‘We’re pleased to announce that we’ve totally revamped the way we complete our Decision in Principle by moving from hard to soft credit checks. This means that all applications will now go through a soft credit check at the initial Decision in Principle stage rather than a hard credit check, as was formerly the case. This enhancement will help to improve the customer experience when applying for a new mortgage application with Barclays as it will provide you and your clients with an accurate lending decision at the initial stage without impacting the customer’s credit file. This is a change that also brings us in line with other tier one lenders across the industry. Please note that a hard credit check will still be conducted on submission of the mortgage application and recorded on the customer’s credit file.’

What This Means For The Mortgage Industry

This shift by Barclays marks a significant improvement in the mortgage application experience for borrowers. By conducting soft credit checks at the Decision in Principle stage, Barclays can provide potential borrowers with a preliminary lending decision without leaving a negative mark on their credit report. This change is aligned with industry trends where top-tier lenders aim to streamline the application process and enhance the customer experience.

The Benefits of Soft Credit Checks

The move towards soft credit checks at the Decision in Principle stage offers several advantages to both borrowers and lenders:

  1. Improved Customer Experience: Borrowers can now receive an initial lending decision without the fear of impacting their credit scores. This reduces the stress associated with mortgage applications and allows for more informed decisions.
  2. Transparency: Soft checks provide borrowers with greater transparency in the lending process. They can better understand their eligibility for a mortgage without formal commitment.
  3. Reduced Impact on Credit Score: With soft checks, borrowers can explore their options and shop around for the best mortgage terms without worrying about the negative impact of hard inquiries.
  4. Efficiency: Lenders can make quicker decisions during the pre-qualification stage, allowing for a more streamlined application process.

Speak To A Mortgage Professional

Barclays Bank’s transition from hard to soft credit checks at the Decision in Principle stage is a welcome change for mortgage applicants. It demonstrates the bank’s commitment to improving the customer experience and aligns with the best practices of the industry. Borrowers are now better positioned to explore their mortgage options without the fear of detrimental effects on their credit scores. As the mortgage landscape continues to evolve, it is essential for both borrowers who are looking to get a new mortgage to speak with an industry professional. At Oportfolio, we are experts at finding the most competitive mortgage lender and product for our client’s unique circumstances. Call or email our team today to see how we can help.

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