When you take out credit, such as a credit card, personal loan or even a mortgage, the lender will run a check. There are two different types of credit check: hard and soft.
Here, we look at what these checks involve and how they affect your credit application.
What is a credit check?
A credit check is when a company – typically a lender – reviews your credit report to assess your financial behaviour and trustworthiness. Lenders run credit checks to decide whether to offer you a product, and the terms for that product. Insurers, landlords and even some employers may also carry out checks as part of their screening processes.
In the UK, your credit report is held by the three main credit reference agencies: Experian, Equifax, and TransUnion. This contains detailed records of your borrowing history, including how much credit you have, how reliably you pay it back, and whether you’ve had issues like defaults or County Court Judgments (CCJs). This helps lenders get an idea of the level of risk they’d be taking by offering you credit.
Understanding who can access this information, and how their checks appear on your file, helps you stay in control of the types of credit you apply for and how often.
Soft credit checks explained
Soft credit checks happen when someone reviews your credit file without performing a full credit application. These are usually for background purposes. You’ll see them listed on your report, but only you can view them, and other lenders can’t. That means soft checks don’t influence your credit score, no matter how often they occur.
You’ll typically come across soft checks when using “check your eligibility” tools on bank websites, checking out deals on comparison sites, or when you get pre-approved credit offers. Employers and landlords might also carry out soft searches to check your financial reliability.
These checks offer you a useful way to understand which products you’re likely to qualify for without putting your credit report at risk. Soft searches don’t affect your credit score.
What is a hard credit check?
If you apply for a credit card, car finance, loan, mortgage or even a mobile phone contract, you will trigger a hard credit check. This type of check leaves a visible mark on your credit report, and lenders reviewing your file will be able to see it.
Unlike soft checks, hard searches can affect your credit score. While it’s typical to have one hard search on your record every now and then, if you apply for multiple products in a short period, it can raise concern among lenders. This is because they could see this as a sign of financial stress or unreliability as a borrower, and could be less likely to approve of you.
Each hard check typically stays on your credit report for 12 months. This doesn’t mean you can’t shop around, but it does mean you should do so strategically. Always try to understand whether you’re likely to be approved before hitting ‘apply’.
How to apply for credit responsibly
To apply for credit responsibly and in a way that won’t impact your credit score, follow these top tips:
- Check you’re eligible: Before you make any formal credit application, check your eligibility using a tool that runs a soft search. Most major UK lenders and comparison sites now offer this feature. It lets you assess your chances of approval without committing to a hard check.
- Avoid multiple applications: If you apply for multiple credit products in quick succession, this can show up on a credit check. If you’re rejected, don’t rush to apply again elsewhere. Instead, review your credit report for potential issues, address any errors, and allow some time for your credit score to stabilise.
- Check how you use the credit you have: Keep an eye on your credit utilisation. This is the amount of credit you’re using compared to your total available limit. Aim to stay under 30% of your total credit limit across all cards and accounts. High usage can make it look like you’re experiencing financial strain to lenders – even if you always pay on time.
Ultimately, applying for credit doesn’t have to be stressful or damaging if you take the right steps. Understanding the role of soft and hard checks gives you the information you need to manage your applications responsibly.
