What is a credit check?

Learn about the checks lenders usually complete when you apply for credit, including the difference between a soft and hard credit check.

What is a credit check?

A credit check is when a company checks your credit report to see how well you’ve managed money or credit in the past. A credit check can also be known as a credit search.

Credit checks are carried out by lenders like banks or building societies. They can also be carried out by utility and mobile phone companies, landlords, letting agencies or even potential employers.

A credit check shows them details about your finances, such as existing debts and credit available to you. They can also show any financial links you have with other people.

A credit check will also show court records, such as bankruptcies, payment defaults, County Court Judgements (CCJs) and Individual Voluntary Agreements (IVAs).

Lenders use credit checks to help them decide whether to accept you for their credit products. These can include loans, credit cards, mortgages, overdrafts or car finance.

The credit reference agencies Halifax use include TransUnion, Experian and Equifax.

More on credit scores

What is a soft credit check?

‘Soft’ credit checks are often used to give a quote, helping you to compare credit products or understand your credit eligibility.

This will still involve a review of your credit report, but it won’t affect your credit score.

What is a hard credit check?

A ‘hard’ credit check is completed when you submit a full application for credit or to use some services. This involves a review of your credit report and may affect your credit score.

Companies need to get your permission before they do a hard credit check.

Why do lenders complete credit checks?

Lenders complete credit checks to help them measure the risk of offering credit, and the likelihood of it being paid back, based on your past financial history. Other companies might also complete checks before offering services to you.

Depending on the type of borrowing, the lowest and longest lasting interest rates are usually offered to low risk applicants, who’ve shown they can manage credit well over time.

Your credit score can also affect the amount of credit you’re offered.

What does a credit check look for?

Credit reference agencies collect information from lots of sources, including:

  • The electoral register – being on the electoral roll is one way that your identity and home address can be confirmed, which could help to improve your credit eligibility.
  • Court records – Defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy might affect your credit score for up to six years.
  • Lenders and other service providers – details about the types of accounts you have, how well they’re managed, your existing debt and the total amount of credit available to you, could all affect your credit score and eligibility.

More on what affects your credit score

How does a credit check affect your credit score?

It really depends on the type of credit check that’s been completed.

Hard credit checks and your credit score

A hard credit check will be visible to anyone checking your credit report, and can impact your credit score for at least 12 months, which could affect your ability to get credit in the short-term.

A number of hard credit searches in a short period could suggest you’re having financial difficulties, potentially influencing the way you’re viewed by lenders and other service providers.

Soft credit checks and your credit score

Although they might be visible on your credit report, soft credit searches won’t affect your credit score, or your ability to get credit in future, so you don’t need to worry about how often they’re completed.

It’s just useful to know that soft credit checks or quotations aren’t offered on all types of credit, so make sure you’re aware what type of checks will be completed before you go ahead.

When will a soft credit check be completed?

Soft credit checks are used to provide insurance or credit quotations, a mortgage agreement in principle, for credit card eligibility, and by price comparison websites.

They can also be used by companies you already have a relationship with, helping them to complete background checks.

A soft credit check is also completed when you check your own credit score and report.

When will a hard credit check be completed?

Hard credit checks are usually completed when a company is:

  • Lending to you, e.g. for a mortgage, loan or credit card.
  • Providing a service, e.g. a mobile phone contract, utility supply or rental property.

Applying for new credit or services could affect your credit score in the short term, but by using and managing accounts responsibly over time, it could help to improve your score overall.

How to improve your credit score


What else do lenders check?

Details you provide

As part of a credit application you’ll be asked for some personal and financial information, which could include your address, employment status, income and regular expenses.

What you can afford

Lenders might review what you can reasonably afford to repay, based on your income, outgoings and anything you’ve already borrowed.

Your account history

Lenders usually keep records about accounts you’ve held with them in the past, including whether or not they were managed well.

A summary on credit checks

Credit checks are completed to measure the risk of lending or doing business with you.

  • Checks are completed by lenders, utility companies and other service providers, letting agencies, landlords and even some employers.
  • Things like your borrowing history, court records and even being on the electoral register, can all affect your credit score.
  • A hard credit search involves a review of your credit record, which may affect your credit score and eligibility.
  • A soft credit check just provides a view of your credit eligibility, which won’t affect your credit score or ability to get credit.

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