Types of searches and credit checks

As part of the application process, a company will check your credit reports. We will explain the two types of credit checks: hard and soft.

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What is a credit search?

A credit search – or credit check, as it’s also known – is when a company looks at information on your credit report to find out how reliable you are at managing your money and paying your debts. There are two kinds of credit searches: a ‘soft’ search and a ‘hard’ search.

Depending on the type, a credit search can provide all sorts of information about your finances: how much you earn and owe, your history of paying your bills and repaying your loans, and whether you share joint accounts with other people. It will also list any bankruptcies or outstanding court judgements against you.

A credit search helps companies decide if they want to do business with you. To perform a credit search, a company submits a request to a credit rating agency (CRA). There are three main CRAs in the United Kingdom: Experian, TransUnion and Equifax. They each keep a record of your credit applications and bill payment history, and base their scores on similar criteria. So if you got a ‘fair’ credit score from one agency, you’re likely to get a similar rating from the others.

What kinds of companies do a credit search?

If you’ve ever applied for a credit card or loan, rented or bought a home, or had a mobile phone, you’ve probably had a credit check. Here are some of the companies and organisations that routinely do them:

  • banks, building societies and other credit providers
  • utility suppliers like gas, water, electricity and telecom companies
  • letting agencies and landlords
  • mobile phone companies
  • potential employers
  • Depending on their reason, these companies could either have done a hard or soft search. But it’s important to remember that nobody can do a hard credit check without getting your permission first.

What is a soft credit search?

Like its name implies, a soft credit search is a quick look at your credit report and doesn’t affect your credit score. Companies may do them as part of a background check and can be done without your permission. These are fairly routine when a credit card company checks your potential eligibility. A credit card eligibility checker will also involve a soft search, and so it won’t affect your credit report. A prospective employer might also run a soft search before hiring you.

A soft search may or may not be recorded on your credit report – but it won’t show up in a credit search or affect your credit score. So you don’t have to worry about how often these are done.

What is a hard credit search?

A hard search is when a company requests a copy of your full credit report.

Unlike soft searches, a hard credit search will leave a mark on your credit report. So if you’ve applied for credit, other lenders will see it if they do a hard credit search. They also see if you were accepted or declined. Typically, any credit or loan application will stay on your report for up to two years. So it’s important not to make too many applications for credit over a short time period, or to reapply right way if you’re declined. However, an occasional hard credit check isn’t likely to greatly affect your credit score.

Hard credit checks are usually done when a company is lending you money or some other form of credit. Here are some common cases:

  • mortgage application
  • personal loan or credit card application
  • car loan applications
  • apartment rental application
  • student loan application.

Why does a hard credit check affect my credit score?

If you make too many credit applications in a short period of time, it could be an indication of financial problems – especially if the applications were refused. A potential lender could interpret this as a sign that you’re a higher risk for a loan or other service.

So if you are considering getting a credit card, it’s always best to first use a credit card eligibility checker before you actually apply. Our credit card eligibility checker is a great way to find out if you’re eligible for a card, and could help identify the cards that are most suitable. That way, you’re less likely to be refused - which could potentially harm your credit score. It’s a smart first step if you’re thinking of getting a credit card.

Can I find out who checked my credit report?

Yes. Your credit report will tell you which companies have done credit checks on you. In fact, credit checks aren’t just useful for companies doing the credit checks. You can benefit from them too – in several important ways.

If you’re planning to take out a loan or apply for a credit card, checking your credit report is a smart way to ensure you haven’t had too many hard credit checks in a short period of time. Since this might harm your chances of being approved.

A review of your credit report is also a good way to find out if someone is fraudulently applying for a loan in your name. Therefore, it’s well worth the time and effort.

Finally, checking your credit report is the best way to find out what the banks and other companies know about you. Here’s how to check your credit score. It’s free. It’s your legal right. And it can really pay off. And in case you’re wondering, you can check your credit score without it affecting your credit report or credit score.

What’s next?

Now that you understand hard and soft credit searches, here’s how to improve your credit score.

How to improve your credit score?