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The difference between soft and hard credit checks

by | Sep 7, 2022 | Clients

You are probably familiar with credit checks and credit searches, but you may be confused about what leaves a footprint on your credit file and what does not.

In general, a credit check is when a company looks at your credit report to see your financial history. This will happen when you apply for financing or make an enquiry about finance. Lenders then use the information in your credit report and your credit score to help them decide whether to grant you a loan.

Your credit report contains:

  • Your name
  • Your address and any linked addresses
  • Your borrowing history – how much you have borrowed and how you have repaid those loans
  • Details of anyone you are linked to financially – such as joint bank accounts or joint loans or joint ventures
  • Any bankruptcies, court judgements or defaults against you
  • Conduct of secured and unsecured accounts including utilities and telephones

What is a soft credit check?

A soft credit check or search will not impact your credit score. It is a quick look at your credit report that companies may do as part of a background check or lenders will do to see if you are eligible for a certain product or interest rate. For example, you can make a soft credit check for car finance, personal loans or mortgages if comparing the best deal. They may or may not show up on your credit report. Typically, companies source their credit reports from credit reference agencies such as Experian, TransUnion and Equifax.

What is a hard credit check?

A hard credit check or search may impact your credit score if too many are made in a short period of time. A hard credit check is done when a company requests a copy of your full credit report. Third parties cannot perform a hard credit search without obtaining your permission.

Typically, a hard check is done when you are applying for credit of some kind, for example a mortgage or other property finance loan. If you apply for credit, other lenders will see that you have done so. If lenders see that you have applied a number of times for credit within a short space of time, it could signal to lenders that you might be struggling with your finances.

Criteria Soft credit check Hard credit check
Impact on credit score No impact on credit score May impact your credit score
When they are used As part of a background check or when a lender checks to see if you are eligible for certain products and interest rates When you apply for credit
Who can see the credit check You can see it, but it does not leave a footprint on your credit file Other lenders so they can see your record of repaying money you have borrowed
Can it be done without your permission? Companies do not have to ask your permission Companies must ask your permission