The ultimate guide to credit checks & searches

Lenders will run credit checks on your credit file if you’re applying for credit, such as a mortgage or a personal loan. This provides them with essential information about your financial circumstances, helping them to decide whether to lend to you.

It’s important to understand the impact of credit checks before you apply for finance. In this guide, we’ll explain what credit checks are, the difference between a soft credit check and a hard credit check, and how they might affect your credit score.

What is a credit check?

A credit check, also known as a credit search, occurs when a lender evaluates your credit report to understand your financial situation better. This helps them assess the likelihood that you’ll be able to manage your repayments.

Companies that may run a check on your credit report include:

• Banks and building societies
• Letting agencies and landlords
• Mobile phone providers
• Credit providers
• Utility suppliers (e.g. gas, water, and electricity)

What is a soft credit check?

A soft credit check (also known as a soft search) allows providers to check your credit report without leaving a visible footprint for other lenders to see. Only you can see soft search credit checks,  such as identity checks and quotations, on your file.

At Shawbrook, when you apply for an instant quote with us, we use a soft credit search to offer you a guaranteed rate with no impact on your credit score. You can review the quote and shop around before deciding if it’s the right option for you. We will only carry out a hard credit search if you proceed with the loan application.

What is a hard credit check?

A hard credit check (also known as a hard search) happens when a lender searches your entire credit report, usually in relation to a credit application. Your file shows vital information to help providers determine how much credit you have, how you manage it, and your credit history.

This type of credit search leaves a footprint on your file which is visible to any company searching your file. If your report shows too many hard credit checks over a short period, it could affect your credit score, and some lenders may consider you a higher risk.

At Shawbrook, we run a soft search when you request a quote. We only use a hard credit check if you proceed with your credit application.

The key differences between a hard and soft credit search

We’ve covered the two types of credit searches and how they might affect your credit score.

Let’s summarise the key differences between a soft and hard credit search.

Soft credit searches:

• Help lenders determine your eligibility for credit
• Don’t leave a mark on your file and can only be seen by you
• Typically do not require confirmation of your bank details

Hard credit searches:

• Occur if a company checks your entire credit report when you apply for loans, credit cards, mortgages or other financial products
• Leave a mark on your credit report and stay visible to other lenders
• Can impact your credit score — too many can be a signal to lenders that you’re a high risk

Should I avoid hard credit checks?

Most hard credit checks remain visible on your credit file for 12 months or longer, so it’s beneficial to minimise credit applications if you’re looking to borrow money.

To avoid hard credit checks on your file, consider using an eligibility checker before applying for credit. By establishing whether you have a good chance of getting accepted, you can apply for credit only when you are more likely to be approved.

If you’ve applied for a loan and been refused credit, it could impact your credit score.