A credit check, or credit search, gives a company access to information about you from your credit report to help them understand how well you manage your finances. Your credit report is a record held by credit reference agencies (CRAs), such as Experian, Equifax and TransUnion, which allows third parties to see key information about you and your credit history over the past six years.
Banks, lenders, letting agents and utility companies are just some of the organisations that may run a credit check on you.
Credit reports hold details such as the debts you currently have, credit agreements you previously held, and any court actions you may have faced as a result of missing payments.
However, the exact data that a company sees will depend on whether it is a hard or soft credit check.
These checks show different amounts of information and have different effects on your credit score, which we explain below.
What is a soft credit check?
A soft credit check is a basic look at your credit history, which only allows a company to view a limited amount of information.
These may sometimes be called ‘quotation searches’ or ‘eligibility checkers’ as providers can use them to see if you qualify for credit.
Soft credit checks are likely to happen when:
- You search your own credit report.
- A company uses your credit report to verify your identity.
- You check your eligibility for credit with a lender.
- You take out an insurance policy.
- You rent a new property.
- You use a buy now, pay later (BNPL) service. However, some BNPL providers will perform a hard credit check, so make sure you confirm what kind of check will be run before applying.
Some employers may also run a soft check before you start a new job.
What does a soft credit check show?
Anyone running a soft search on your credit file will be able to see:
- your name, home address and date of birth
- any current credit agreements you have
- whether you’re registered on the electoral roll
- a top-level view of your financial history
While checking your own credit history will appear as a soft search on your file, you will be able to see your full credit report with more detailed information.
Do soft searches affect your credit score?
You will be able to see soft searches on your credit history, but any third parties that run a credit check won’t be able to see them.
Soft credit checks don’t leave a mark on your credit history. As a result, soft credit checks won’t affect your credit score and any credit applications you may make in the future.
Checking your eligibility for credit won’t affect your credit score and can tell you how likely you are to be accepted for the credit you want. This can help to minimise the chances of your application being rejected, and so reduces the number of hard credit checks on your credit file.
» MORE: What affects your credit score?
What is a hard credit check?
A hard credit check is a full search of your credit history. Unlike a soft search, a hard credit check will leave a mark on your credit file.
Hard credit checks are likely to take place when:
- You formally apply for any form of credit, including mortgages, loans, credit cards or overdraft facilities.
- You take out car finance or finance for another item.
- You sign up with a new utility provider. Bear in mind that this depends on how you choose to pay, and some providers may only run a soft search.
- You sign up for a pay-monthly mobile phone contract.
- You take out an insurance policy and pay for it monthly.
Through this check, providers will be able to see how you have handled credit in the past and if you have made your repayments on time.
They will use this information to work out the level of risk you present and how likely you are to make the necessary payments if they approved your application. Hard credit checks can also help lenders to work out what interest rate to charge.
What does a hard credit check show?
Some of the information a hard credit check can show includes:
- your name and date of birth
- your address history
- whether you’re registered on the electoral roll
- any current account overdrafts you have
- hard credit checks that have been performed over the past 12 months
- credit you currently access, such as loans, credit cards or mortgages. This will include details on credit limits and the amount you still owe.
- any credit that you have paid off within the past six years
- late or missed payments, and if you have defaulted on any credit agreement
- debt relief orders (DROs), individual voluntary arrangements (IVAs), county court judgments (CCJs) or ‘decrees’ (Scotland only), bankruptcies, or home repossessions
- if you are linked financially to other individuals – through a joint account or loan, for example
- whether you have been a victim of fraud or committed fraud yourself
Most of your financial information will stay on your credit file for six years.
Bear in mind that, whatever kind of credit check they run, companies won’t be able to view your bank statements, how much you earn and whether you have a criminal record, for example.
A credit check will also reveal your credit score – a number that helps to indicate your creditworthiness to lenders. Each CRA has a different scoring system.
How long do hard searches stay on your credit file?
Hard credit checks will usually stay on your credit file for at least 12 months and will be visible to any company that subsequently runs a credit check.
Too many hard credit checks over a short period of time will affect your credit score and could indicate that you are struggling financially. As a result, you should make sure you space out any applications for credit.
Who can perform a credit check on me?
A variety of third parties can run a credit check on you, but they must have a valid reason to do so. As mentioned earlier, examples of organisations that might run a credit check on you include:
- banks
- lenders and credit card companies
- mortgage providers
- insurance companies
- utility companies and other service providers (gas, electricity, water, broadband)
- mobile phone companies (if you’re on a contract)
- landlords and letting agents
- employers
Some of the above will only conduct a soft credit search, so they won’t be able to see all the information on your credit file.
For example, employers and landlords will only be able to see publicly available information, such as your name, address, and if you have any CCJs.
You should always be told if a company is going to run a credit check and some groups, such as landlords and letting agents, need to ask your permission first.
If you apply for a product in a joint name, on a bank account or mortgage, for example, a credit check will be performed on both parties.
Can I check my own credit score?
Yes, you can check your credit history for free, without affecting your score.
All three main credit reference agencies allow you to view your credit history and see your score. It’s worth looking at your file with all three agencies as there may be some variations between them, and providers may use different agencies for their checks.
It’s a good idea to check your credit score on a regular basis, especially if you plan to apply for credit in the near future. If necessary, you can then work to improve your credit score and increase your chances of getting accepted for credit at a competitive interest rate.
Checking your credit history also means you can spot any mistakes that may be on file and ask the agency to correct them.
» MORE: How to check your credit score
Dive even deeper
Autumn Budget 2024: What Tax Rises Mean for You
by Sam Bromley
What is TransUnion? How to Get Your Credit Score and Credit Report
