What is a credit check?
A credit check, also known as a credit search, is when a company looks at information from your credit report to understand your financial behaviour. They don’t always need your consent to do this, but they must have a legitimate reason (e.g. you applied for a loan with them).
Companies that may do a credit search on you include:
- Banks and building societies
- Credit providers
- Utilities suppliers (e.g. gas, water and electricity)
- Letting agencies and landlords
- Mobile phone companies
- Employers (although they won’t see your full report)
As part of a credit check, companies may look at whether you’ve paid back your credit on time, how much credit you currently have and how you’re managing it. They may also look at any financial associations you may have (such as someone you share a bank account or mortgage with) and what their credit history is.
It’s worth noting that checking your own credit report or credit score won’t affect your score or your likelihood of being accepted for credit – no matter how many times you check them.
There are two types of credit check – a soft credit check (or soft search) and hard credit check (or hard search).
What is a soft credit check?
A soft credit check is an initial look at certain information on your credit report. Companies perform soft searches to decide how successful your application would be without conducting a full examination of your credit history.
Crucially, soft searches aren’t visible to companies – so they have no impact on your credit score or any future credit applications you might make. Only you can see them on your report and it doesn’t matter how many there are. When you compare credit cards, loans and mortgages with Experian, a soft search will be done on your report. Remember, we’re a credit broker, not a lender†.
What is a hard credit check?
A hard credit check happens when a company makes a complete search of your credit report. Each hard check is recorded on your report, so any company searching it will be able to see that you’ve applied for credit.
Too many hard credit checks over a short period of time can affect your credit score for six months, reducing your ability to get approved for credit in the future.
If you apply for credit, the company you apply to will do a hard check of your credit report to see your suitability. But you can also be subject to a hard check from utility providers and mobile phone companies when applying to use their services.
How are soft and hard credit checks different?
Soft credit checks aren’t visible to companies, but hard credit checks are. That means that soft credit checks won’t impact your score (no matter how many of them there are), while each hard credit check may lower your score.
Here are some examples of when a soft credit check can happen:
- You search your own credit report
- A company searches your credit report as part of an identity check
- You use Experian to compare credit and see how eligible you are
Here are some examples of when a hard credit check can happen:
- You apply for a loan, credit card or mortgage
- You apply to a utility company
- You apply for a pay-monthly mobile phone contract
Why are soft credit checks useful?
Because soft credit checks leave no trace on your credit report, you can use them to see how eligible you are for a wide range of credit without actually applying – whether you’re looking for a loan to pay for a holiday or a credit card for everyday purchases. There’s no limit to how many soft checks you can have and they’ll never affect your credit score, even if you have lots close together.
Can I ‘fail’ a soft credit check?
Don’t worry, you can’t ‘fail’ a soft credit check. With a soft search, you’re not actually applying for anything – so it won’t result in a lender’s decision. But a soft credit check can show your chances of your credit application being approved.
Why do hard credit checks affect my credit score?
Lots of credit applications in a short space of time may make companies think you’re in financial trouble, or that you rely too much on borrowing. A hard credit check shows you’ve applied for credit, so they signal to lenders that you may be higher risk.
Making too many credit applications at once can be a reason for being turned down for credit. See our guide to the most common reasons people are refused credit for more information.
Most hard searches will stay on your credit report for 12 months.
Can I avoid hard credit checks?
To minimise the number of hard searches on your report, you’ll need to make as few credit applications as possible. But you can ensure the applications you do make have a higher chance of acceptance, by only applying for credit you’re eligible for.
You can check your eligibility rating for credit cards and personal loans when you compare them with Experian. It’s free and only a soft search will be recorded on your report, meaning your score won’t be affected unless you actually apply.
With a CreditExpert or ID Plus subscription, you can also lock your Experian Credit Report to help protect yourself from fraudsters applying for credit in your name.
Can I get hard searches removed?
No, you can’t remove a hard search if it was the result of a credit application you made. But most hard searches will drop off your report after a year.
However, if you see a hard search on your report that you don’t recognise, it could be a sign of fraud or identity theft. If you do become a victim of fraud, the lender should correct any damage to your report and score quickly. Our Victims of Fraud team can also help you get things sorted.
How can you reduce the impact of hard credit checks?
If you do have to make credit applications – whether for a new mobile phone contract, loan or a credit card – spacing them out can help protect your score. A good rule of thumb is no more than two or three applications every few months, although remember that different companies have different criteria when it comes to your credit score.
If you do apply for credit and your credit score is affected, there may be steps you can take to improve it again and keep it healthy. You can get an idea of how lenders may see you by checking your free Experian Credit Score.