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What is a credit check?
14th April 2022
What is a credit check?
Understanding credit checks
Each time you’ve applied for a credit card, a short or long-term loan, or even if your phone is contracted, you’ve probably had a credit check.
Credit checks are searches carried out by lenders when you apply for credit, they are used by companies to view your credit report and understand your financial behaviours before they decide to do business with you. The information available to lenders may include; your earnings, any previous loans, payment history of bills or credit, any outstanding payments and joint accounts you share with others.
All responsible lenders will carry out credit checks as part of your application, and it doesn’t necessarily mean that you will be declined for a loan.
Lenders are able to do two types of searches when you apply for credit – a ‘soft credit search’ and a ‘hard credit search’.
Soft credit check
A ‘soft credit search’, or ‘soft credit check’ as indicated by the name, is a quick look at your credit file. These are usually part of a background check, without looking at your full credit history.
Did you know that checking your own credit score is counted as a soft search?
Whilst soft searches may or may not be recorded on your credit report, they will not show up in a credit search nor will they affect your credit score, there is no need to worry about how often these are done. Soft searches may also be done without your permission.
Hard credit check
A ‘Hard credit search’ or ‘hard credit check’ is an in-depth look at your credit file - a company requests a full copy of your credit report. These searches will leave a ‘mark’ on your credit report. This means that other lenders will be able to see where you have applied for credit, and whether you were accepted or declined when doing a hard search.
It is best to keep hard searches to a minimum over a short period of time, as these stay on your credit report for 12 months and may affect the chances of an application being approved.
More information about the differences between both soft and hard credit checks can be found here.
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