5 Things to Remember About Soft Credit Checks

In the world of online lending, a soft credit check is a very different process than a hard credit check. Before we can understand why people are interested in using this alternative method of vetting potential clients or employees, it’s important to understand what it is and how it works. This article will explain the differences between a soft and a hard credit check, what to look for in a soft credit check API and what credit checks can do for your business.

Soft credit checks seem like a relatively new concept. In truth, they’re not. Soft credit checks date back to the 90s when they were referred to as “Permission-Based Data” or “Permission-Based Demographics”. The difference between soft credit checks and traditional background checks is that the former requires explicit opt-in consent while the latter requires the applicant’s explicit opt-out consent. Meaning, your clients, potential hires or tenants, would need to give permission to have a soft credit check completed.

1. Soft credit checks don’t affect credit scores

A soft credit check is a credit inquiry that does not affect your credit score- they simply ask your permission to run a search of your public records. Companies may offer soft credit checks as part of their onboarding process or as a way of collecting information about potential customers without impacting their scores. This is a non-invasive way of vetting potential clients or applicants without any negative impact on the person being considered.

2. Soft credit checks can save you money

Companies that offer soft credit checks benefit from this service because it helps them avoid hiring people or doing business with people who may not be creditworthy. Soft credit checks are an excellent way for businesses to verify information about potential customers without having to commit to a full hard credit check. They’re also less expensive to run than a hard credit check. In the long run, a soft credit check can save you huge amounts of money by avoiding hiring someone who is not trustworthy with money or by doing business with someone who won’t pay their debts.

3. There are resources available to help you run a soft credit check

An Application Programming Interface (API) is a set of rules and specifications that allows two different computer applications to communicate with each other. In this case, it’s used by lenders who want to offer soft credit checks but don’t want to spend months developing their own software application from scratch. Think of it as the middleman between your business and the credit database. The soft credit check API helps pull the information and sends it back to the user in an easy-to-read report.

4. Running a soft credit check is simple

Through services like a soft credit check API, you don’t need to wade through endless paperwork, you can simply put in the information and let the system do the work. This can help speed up the process for your business while maintaining the integrity and quality of the information provided. You don’t want to wait months for an agency to run a hard credit check on a potential client. That would lose you time and business. Using a soft credit check API is as simple as putting in the information and receiving the report.

5. Soft credit checks help you determine your ideal client or team member

By seeing a potential client’s credit history, you can start to determine what values you want from your ideal client. A soft credit check can be an important part of the application process for a job. Employers should remember that conducting a credit check on every applicant doesn’t necessarily provide enough relevant information. That’s why it makes sense to offer applicants the opportunity to opt-in to a soft credit check. It provides valuable insight into the habits and financial responsibility of potential employees while being non-intrusive and easy to use. And at the end of the day, employers should use this information in conjunction with other factors when making an employment decision.

It’s important to understand the laws in your country/state/province around soft credit checks for employment, tenancy or business. Not all jurisdictions allow this as part of a hiring or leasing process so be sure to double-check whether this is right for you and your business.

That being said, if it is allowed, this extra information can often provide insight into customers or potential hires and give you a better understanding of who you are doing business with. This is an important step for your company to feel confident in the people you are making deals with. In the end, it can save you money, time and stress.