A credit check (or credit search) is when a business or lender looks at your credit report to see your financial history and determine whether or not to lend to you. Your credit report contains things like:
- your name and address
- borrowing history
- details of anyone you’re linked to financially
If you’re looking to apply for finance, there are two different types of searches which can be carried out on your credit report – a soft credit check and a hard credit check.
What's a soft credit check?
A soft credit check may be carried out by a lender to see whether you’re eligible for certain products or interest rates. The lender may want a top-level view of your financial history so they can pre-approve any offers or show you what you could potentially be eligible for.
This type of credit check doesn’t leave a visible footprint on your credit file, but it's recorded. This means no other lenders can see it and it shouldn’t impact your credit score, but you’ll be able to see if anyone has checked your credit history.
If you view your own credit report this will also come up as a soft credit check. You may also find that in certain industries employers will want to perform a soft credit check if you’ve recently applied for a job with them. This will depend on the employer.
What's a hard credit check?
If you’ve made an application for finance, whether it’s for a credit card, personal loan, mortgage or another form of lending, the lender will do an in-depth check of your credit report.
This is a hard credit check and can appear on your credit report for around 12 months.1
A hard credit check will look at your financial history so the lender can see how responsible you have been in repaying money you have previously borrowed. Any negative marks on your credit report, like overdue payments or debt collection, may stay on your credit report for a number of years.
What's the difference between hard and soft credit checks?
The main difference between the two searches is that a hard credit check leaves a visible footprint on your credit report which other lenders can see. They’ll also be able to check if you’ve been successful or not for any credit applications.
Be aware that if you apply for finance a number of times within a short space of time it could signal to lenders that you may be struggling to manage your finances and are a risk to lend to. It may also impact your credit score for a period of time.
Tips to help with your credit report
To improve your credit score there are some things you can do:
- check your own credit report to make sure any information held about you is correct
- use an eligibility checker when looking for finance - they usually perform soft credit searches to show you what finance or rates you’re likely to be approved for
- speak to a prospective lender to see what kind of search they carry out before you fully apply for finance
Explore more: How to improve your credit score
If you’re thinking about applying for finance it may be worth checking the information the credit reference agencies have about your financial history. There may be a small fee for doing this, but it can be a useful way to ensure all your details are up to date and there are no mistakes.