Who runs a soft and hard credit checks at AIP

What you need to know about an Agreement In Principle AIP also known as a Decision In Principle DIP

The earliest stage in a mortgage is an agreement in principle (AIP) and it can involve a credit check depending on the Mortgage Lender. Please note these are lenders that we have access to via the Broker credit profile systems will be different if you’re looking to go to the lenders direct.

“An agreement in principle AIP” itself can mean different things to different Mortgage Lenders; some see this an initial oral indication to lend i.e. you put forward the scenario (typically the salient points) and an underwriter provides a verdict. For instance you might disclose you have had a £250 default on a water bill, it does not follow that the Mortgage Lender needs to run a credit check to confirm what you’ve already told, they merely comment on the likelihood of this being accepted.

However, down the years this process has morphed into “decision in principle” which almost certainly will include a credit check and often validation of your credit score. This process normally involves an automated computer decision at the front end and may result in an underwriter reviewing if it is borderline.

The need for a “decision in principle DIP” with a credit check will be driven by the individual Mortgage Lenders’ objectives. The large volume Mortgage Lenders such as Halifax and Santander would simply use the an automated process to whittle out the applicants they don’t wish to lend to, comfortable in the knowledge they can make up their targets with a drop in price (interest rate) if they need to. Specialist Mortgage Lenders such as Precise Mortgages will use the credit check to determine the mortgage product in accordance to the risk to them e.g. a record of mortgage arrears might be higher priced product than a customer that has always paid on time.

Will the credit check affect my credit rating?

There is an increasing trend of Mortgage Lenders that operate a “soft” search agreement in principle. By that I mean the respective Mortgage Lender will see the result and may share this with other brands within its broader Group, and it will also be recorded on your credit report; however it will not show on your public record so will not have a detrimental effect to your credit rating. By the way, if you are thinking of getting a credit report, I would urge you to consider a “multi-agency” one as this covers the main sources a Mortgage Lender will reference. Try it FREE for 30 days, then £14.99 a month – cancel anytime.

Try it FREE for 30 days, then £14.99 a month – cancel anytime

The Mortgage Lenders that run on the basis of a “hard” search may allow you to amend the facts in the decision in principle with a certain timeframe. For example, you have intended to buy a property at £250,000 but through negotiation you have got the price down to £248,000, the Mortgage Lender may allow a re-run without any further blemish to your status.

I stress the point that even if a Mortgage Lender operates a “soft” search at decision in principle will be superseded with a “hard” search once you make a full mortgage application. 

Below is a summary of some of the Mortgage Lenders approaches to Agreement In Principle (AIP).

This information was compiled 27th April 2020 and should be re-checked with the respective lender for the up-to-date position, prior to submission.

*The Barclays Consumer website offers a “soft search” but is a watered down agreement in principle whereby only some credit data is verified, this is NOT a full decision-in-principle and could be misleading. For a reliable full decision, which leaves a “hard” footprint, you will need to speak to a Barclays Advisor or an independent Mortgage Brokers such as Niche Advice.

To find out more about Credit Reports and what I think of the different types just Click Here to watch my video on this subject.

I’m a professional Mortgage Broker and through my experience, I should be able to guide you to an appropriate Mortgage Lender for your circumstances to avoid multiple decision in principles being run at Agreement In Principle AIP or full application stages.

Author: Payam Azadi

Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.

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