What is a credit check? Soft vs. hard credit checks explained

If you apply for a loan, mortgage, credit card or overdraft, one of the very first steps lenders take is to look at your credit history. By looking at how you’ve managed things like credit, utilities and loans in the past, credit checks help lenders and creditors review your affordability and decide whether you’re suitable for borrowing.

In this guide, we’ll explore how credit checks work, diving into the difference between hard vs soft credit checks. We’ll uncover how long hard searches stay on your credit file and whether soft searches affect your credit score, before showing you where to go to check your credit rating.

In this guide:

• What is a credit check? 
• How does a credit check work? Soft vs hard credit checks 
• Credit score brackets: How am I scored?
• How to check your credit rating 
• Credit check FAQs

What is a credit check?

A credit check reviews your financial situation and history. When you apply for new credit of any kind, lenders and creditors will almost always carry out a credit check. Lenders and creditors use credit checks to evaluate your ability to pay the money back, checking your eligibility and affordability before accepting or declining your application.

Lenders and creditors will access your financial history through one of the three main credit reference agencies (CRAs) in the UK:

• Experian
• TransUnion
• Equifax

Creditors and lenders will check with one of these agencies to assess your creditworthiness based on information from other creditors you have accounts with.

You’ll often need to pass a credit check when you apply for:

• Personal loans
• Short-term payday loans
• Mortgages
• Credit cards
• Mobile phone contracts
• Overdrafts
• Buy now, pay later (BNPL) credit agreements
• Car finance

How does a credit check work? Soft vs hard credit checks

There are two main types of credit checks: soft checks and hard checks. Let’s explore these in more detail below.

What is a soft credit check?

A soft credit check is a quick credit check that provides a snapshot of your financial history. Soft checks are not visible to lenders in the way that hard credit checks are. They’ll leave no trace on your credit record, and therefore won’t affect your credit score.

Soft checks can be used to identify which financial products you might be eligible for without applying. A soft credit check usually takes place when you:

• Check your credit score
• Use an eligibility checker tool for credit cards and personal loans
• Use price comparison websites for initial quotes on insurance, mobile phone contracts and finance agreements
• Request a mortgage in principle

What is a hard credit check?

A hard credit check involves carrying out a more detailed search of your financial history, i.e. your credit record. When applying to borrow credit, lenders and creditors will usually carry out a hard credit check to see if you’re suitable. Unlike soft credit checks, hard checks are visible to lenders and show that you’ve applied for credit, whether you were accepted or not.

With this in mind, it’s important to remember that if you apply for lots of credit in a short space of time, lenders might see this as being reliant on borrowing. They could also suspect that you’re experiencing financial difficulties.

A hard credit check is usually carried out when you apply for:

• Credit products, such as a credit card, auto loan, personal loan or mortgage
• Mobile phone contracts
• Utility services

What does a credit check show?

Your credit report is a detailed summary of your borrowing profile from the last six years. Both soft credit checks and hard credit checks show the following information on your credit file:

• Your full name
• Date of birth
• Current address
• Previous addresses
• Any open accounts for mortgages, loans, overdrafts or credit cards (including total credit limits, outstanding balances, dates when the accounts were opened, and your repayment history)
• Joint accounts and credit
• Accounts closed in the last six years
• Missed payments and defaults
• If you have a history of CCJs
• Bankruptcy
• Electoral registration status
• Any notices of correction (NOC) added to your credit report, explaining any credit flags, missed payments or other information

Credit score brackets: How am I scored?

A credit check will generate a credit report, which is then used to calculate your credit score.

• Your credit score reflects your credit history, and will help determine whether the lender or creditor will accept your application.
• Higher credit scores indicate better creditworthiness, whereas lower credit scores suggest lower creditworthiness.
• Each credit bureau has its own scoring system, so your score may look different depending on which one you check. For the most part, scores can range anywhere from 300 to 900.

Your credit score is based on various factors, assessing the risk of providing credit to you. Some creditors and reporting agencies also like to see diversity when you’re looking to borrow money. If your borrowing habits haven’t changed much over the years, your credit score may not change or improve by much either.

Learn more about what makes a good credit score, or read more about how Experian reviews your credit in our Experian credit report guide.

How to check your credit rating

Checking your credit rating is pretty straightforward. All CRAs are obligated to offer a copy of your statutory credit report for free. If you’re actively trying to improve your current score, you could consider signing up for an account with one of the main CRAs to receive monthly updates on your credit report.

For an extra subscription fee, you can also access advanced reporting such as fraud alerts, credit score forecasts, and recommendations for how to improve your credit report.

Our guide to how to check your credit score for free can show you how to review your credit report with the top CRAs.

Credit check FAQs

How does a credit check affect your credit score?

Soft credit checks won’t affect your credit score. However, hard credit checks can make your credit score drop by up to five points, though their impact will reduce after a couple of months. If you make various hard inquiries within a short period of time, their impact may go on for longer.

How long does a hard credit check last?

According to Experian, hard credit checks can stay on your credit report for a year or two, disappearing after two years.

How long does a credit check take?

A credit check is usually a quick process, though it can depend on the creditor and their application process. Some credit checks may take a matter of seconds, while others may take a day or longer, depending on the kind of information that has been requested.

What do lenders check?

Creditors and lenders will often check your credit history to see factors such as:

• How many credit accounts you have in your name
• How you manage your existing credit balances
• Your debt-to-income ratio, showing how much of your earnings currently go toward paying back existing debt
• Financial associations, such as joint accounts, mortgages or loans
• Missed payments and defaults

Explore more useful guides and resources with Moneyboat

Now you know a little more about how credit checks work, you can confidently set your sights on boosting your creditworthiness. From mortgages and loans to everyday credit cards and phone contracts, showing creditors that you’re a good borrower can help increase your chances of being accepted for more favourable credit agreements. Understanding your credit report may be the first step to get there, but it’s by no means the last.

Here at Moneyboat, credit checks are a vital part of our responsible lending process. Before we accept you for one of our flexible payday loans, we’ll carry out thorough checks to make sure you never borrow more than you can afford to pay back.

Looking for more financial insights? Learn more about credit options with our personal loan guide, as well as whether you can use buy now, pay later with bad credit. Explore our list of third-party support resources for free, independent financial advice.

Important: Moneyboat provides a flexible short-term loan. Although these loans are widely recognised and often searched for by our customers as 'payday loans', our focus is on providing clear and accessible financial options that meet your needs.