What is a credit card eligibility checker?

 

Woman checks her eligibility

Credit card eligibility checkers are tools that enable applicants to understand whether they are likely to be accepted for a particular product before they make a full application.

Eligibility Checkers are a relatively new phenomenon in the credit card space, but they are becoming increasingly popular, not only with consumers, but also regulators, who see their benefit to consumers.

How do eligibility checkers work?

To understand how eligibility checkers work, it is necessary to understand the process undertaken when an application for a credit card is made.

Firstly, a customer compares credit card deals and finds a product they wish to apply for. Once the application form has been completed and submitted to the card issuer, a number of checks are undertaken to assess whether an applicant should be approved or declined. These checks involve the credit card issuer gathering data from a number of different sources. This data is then used to inform the issuer’s ‘decisioning’ model, or score card.

Some of the most important data that influences the lenders decision is the data held by the UK credit reference agencies. Issuers will source credit reference data from at least one, but usually two of the UK reference agencies – permission for this sourcing is agreed by the applicant in the terms and conditions of the application form. Every time an issuer sources this data (also known as a ‘hard search’) a mark is left on the credit file of the applicant that credit has been applied for.

These marks are to be expected, but having too many of these marks (especially in quick succession) is often interpreted by prospective lenders as a signal that the applicant is in need of credit because they are in financial distress. People in financial distress are not viewed as good prospects for lenders, so they generally decline credit to people with too many applications. How many is ‘too many’ is open to interpretation, but they should be kept to an absolute minimum.

Eligibility checkers are a powerful tool because they use the data that credit card issuers obtain when they conduct a ‘hard search’, but eligibility checkers do not leave a mark on the applicant’s credit file. This is because they use what is known as a ‘soft search’, the type of search that is undertaken when an individual checks their own credit record. Issuers use the data they obtain to accurately determine an applicant’s prospects of being accepted for credit before they make a full application. This means that only applicants who have been told that they are likely to be accepted go on to make a full application. When a full application is made, a full ‘hard search’ is completed.

If an applicant is informed that they have little chance of being accepted, they are then able to apply for alternative products, without a mark on their file to indicate they have made other recent applications.

Do eligibility checkers always work?

Unfortunately eligibility checkers are not always failsafe. People can still be rejected having been informed via an eligibility checker that they were likely to be accepted. However, cases such as these are limited and eligibility checkers are indeed very accurate. The technology that powers eligibility checkers is now so reliable that a number of issuers can pre-approve applicants solely on the basis of the ‘soft search’ they conduct.

What information is required for a ‘soft search’?

To use online credit card eligibility checkers, an applicant must supply much of the data they might be required to supply for a full application, including:

 

This can seem onerous if completed a number of times, but the certainty of success that eligibility checkers offer makes the task more than worthwhile.