If you want any kind of credit product, like a credit card or a loan, you’ll need to find a lender who provides it. Responsible lenders want to be sure borrowers can repay their debts, so there’s less risk for them. For this reason, lenders do a credit check on people who want to borrow from them.
When applying for credit, it helps to know the difference between the two types of credit check. You can either have a ‘hard’ or ‘soft’ credit check and it’s important you know the differences between the two.
In our guide, we’ll help you understand how both soft and hard credit checks work, the main differences between the two and their impact on your credit score.
What's a credit check?
Doing a credit check is a pretty simple process. A lender looks at your credit report to understand your financial history and habits. They use this info to work out whether you’re good at managing money and debt and this helps them decide whether to lend to you.
Lenders don’t need your permission to run a credit check, but they must have a legitimate reason for doing so. Usually, this’ll be because you’ve applied for one of their financial products.
Why do lenders need to carry out credit checks?
There are a few reasons. The main one is to understand how much money you have coming in and out each month to see if you can manage repayments. Regulated lenders do need to conduct creditworthiness checks, which includes seeing how you’ve managed credit in the past.
When lenders do credit checks, they’re basically assessing how risky you are to lend to. And also, how likely you are to pay them back based on your financial history.
What's a soft credit check?
A soft credit check, or soft credit search, is when a lender checks your credit report for something specific. This could be whether you stay up to date with loan repayments or other credit commitments. Soft searches are sometimes called a ‘quotation search’.
A soft credit check will show these things:
- Your payment history
- Any loan or credit card details
- Current levels of credit or debt
Companies often do a soft search credit check to find out whether you’d qualify for one of their products before you complete an application. This is known as checking your eligibility. If you use an eligibility checker on a lender’s website, this’ll tell them (and you) whether it’s worth applying for that product.
A soft search credit check will show up on your credit report - but it can only be seen by you. This means it doesn’t matter how many soft searches you do, as each lender will only know about their own search. When you check your own record, this is also seen as a soft search. Your credit report might also be used to confirm your identity.
Soft searches don’t affect your credit score, making them a friendlier option when it comes to seeing what types of credit you’re eligible for.
How long do soft checks remain on your credit file?
Soft checks normally stay on your credit file for 12 months. But they may not show up on your file at all, as they don’t affect your credit score. It’s worth noting that their visibility can depend on who the credit provider is.
Do soft checks show County Court Judgments (CCJs)?
Just because it’s called a ‘soft’ check, it doesn’t mean it’s not thorough. A soft check can show a CCJ on your credit file, which may affect your application at that time.
Want to know more about CCJs (including what they are and their potential impact on your finances)? Check out our dedicated CCJ page.
What's a hard credit check?
This is more detailed than a soft credit search. And it allows the lender to search your entire credit report, including all loans and credit products. Lenders might do a hard check to see if you have a history of managing money and debt well, or whether your track record shows you’re likely to be a high-risk borrower. Hard searches are also sometimes known as ‘credit application checks’.
Hard searches are recorded on your credit report, so it’s important not to apply for too many products that trigger a hard search in a short space of time. Remember, it’s not just lenders who do hard searches. Utility companies and mobile phone providers might too.
If you’re searching for a new mortgage and lots of lenders run a hard search on you in a very short space of time, credit agencies will notice this. But they should realise this kind of sudden activity is perfectly normal and doesn’t mean you’re in financial trouble or desperate for credit.
Can you avoid hard credit checks?
Although a hard credit check is impossible to avoid when doing a full credit card application, it’s best not to commit to too many, as this can affect your credit score.
Make sure you take advantage of soft credit checks that credit card providers offer. This lets you see which cards you may be eligible for, or are more likely to be accepted for, before you apply and go through a hard credit search.
Can you remove hard credit checks?
No. But they will disappear from your credit file over time.
It’s important you don’t make too many applications and only commit to hard searches when the chances of being accepted are high.
How long do hard credit checks stay on your credit file?
These checks remain on your file for two years. However, they usually only affect your credit score for one year, depending on how well you’ve managed your repayments in the months since your last hard check and your credit history before it.
How are the two checks different?
The main difference is that soft searches aren’t visible to companies and hard searches are. No matter how many soft searches are on your credit report, they won’t damage your credit score.
Hard credit searches can count against you by lowering your credit score. Lenders get nervous if you apply for borrowing too often as this can suggest you’re reliant on credit. Lots of hard searches on your credit report will make you look like a high-risk borrower and can damage your credit score. A lower score can limit the kinds of credit you can apply for.
Here’s a quick summary:
Soft search checks
- Invisible to companies.
- Don’t affect your credit score.
- Used for eligibility checks, identity checks and viewing your own credit report.
Hard search checks
- Visible to companies.
- Stay on your Experian or Equifax record for 12 months from the search date.
- Can lower your credit score.
- Used when you apply for credit, loans, mortgages, utilities or mobile phone contracts.
How credit checks affect your credit score
Hard searches can stay on your credit report for up to two years and can lower your credit score. Remember, too many applications in a short space of time may make you look reliant on credit. This may give lenders the impression you don’t manage your money well and put them off lending to you. With soft search checks, it’s much simpler. They don’t show up on your record so they don’t impact your credit score.
Important things to remember
- Hard searches show on your credit report and can damage your credit score. Think carefully before applying for products that involve a hard search.
- It doesn’t necessarily mean you shouldn’t apply. But consider the impact of an application and how often you apply for credit.
- The length of time searches will be visible on your credit report depends on the credit reference agency you use.