Soft vs. Hard Credit Checks: How Do They Affect Your Score?

Thinking about a loan, switching up your gas supplier, or getting a new phone contract? You’ve probably come across the term ‘credit check’. It might seem like just another step, but it can actually have a big impact on your credit score and your chances of landing those deals. We’re here to break it all down so you can stay in the know and keep your finances in shape.

What is a credit check?

A credit check, otherwise known as a credit search, is carried out to see how you have previously managed your money and what your credit score looks like. They look at any current and previous credit, such as loans, mortgages and credit cards, to evaluate how reliable you are and if they want to do business with you. Not just limited to lenders, utility companies and phone providers sometimes do a credit check to see if you’re likely to pay your bills on time. Credit checks can be split into two types: soft and hard credit checks. We’ll dive deeper into these later.

What are credit checks used for?

Several businesses use credit checks for various reasons, including:

• Lenders and financial institutions, including banks, mortgage providers, credit card companies and payday loan providers
• Car finance companies
• Utility providers, including broadband and water suppliers
• Insurance companies
• Employers, when hiring for management positions or financial roles
• Phone providers
• Landlords and rental agencies
• Retailers offering store credit and buy now pay later schemes
• Government agencies, such as tax authorities
• Debt collectors
• Subscription providers

Read more: What Information Is Included In My Credit Report?

What is a soft credit check?

A soft credit check is a surface-level check used to get an overview of your financial history. If you check your own credit score using a credit reference agency, this is classed as a soft credit check. They are often used for pre-approved credit offers to provide accurate quotes and see what loans and interest rates you would be eligible for. A soft credit check may also be used by landlords when you’re applying for a rental, banks keeping an eye on your account, or even when employers want to do a quick background check.

What does a soft credit check show?

More of a glimpse than a full view of your financial history, a soft credit check often includes:

• Personal information including name, date of birth and registered address.
• Current credit such as your bank accounts, loans, car finance and rental agreements.
• Past credit agreements and details of repayments.
• Details of anyone who has been financially linked to you, for example, if you share a mortgage or have joint accounts.
• Legal information regarding bankruptcy or financial misconduct.

Does a soft credit check affect your credit score?

No, it doesn’t! The great news is that a soft credit check won’t impact your credit score. While it’s recorded, only you can see who’s done the check and when, meaning businesses and lenders won’t know. This allows you to shop around for quotes and check your eligibility with as many providers as possible without worrying about affecting your credit.

Learn more about what affects your credit score.

What is a hard credit check?

A hard credit check is a more detailed look at your credit history that lenders use to decide whether or not to grant you credit. It gives them the full report they need to evaluate how trustworthy you are when borrowing money. It is commonly used by loan or mortgage providers, credit card companies, financing companies, and utility companies.

What does a hard credit check show?

A hard credit check provides a complete picture of your financial history, including the following:

• Personal information, including name, date of birth and registered address.
• Credit score.
• Credit history, including any previous loans, mortgages or credit cards.
• Current credit, such as existing loans and finance agreements.
• Payment history, including whether you’ve paid bills on time and any overdue or missed payments.
• Outstanding debt.
• Credit utilisation. This shows how much of your available credit you are using.
• Public records, including bankruptcies, judgments and liens.
• Other hard credit checks. This displays a list of any other inquiries on your credit history made by other lenders or businesses.
• Those you’re financially linked to.

Does a hard credit check affect your credit score?

Yes, a hard credit check can affect your credit score. Each check stays on your credit report, and other providers can see that you’ve applied for credit, which may lead them to see you as more of a risk and less financially stable, especially if they see multiple applications in a short time. But don’t stress; the drop in your score is usually pretty small and only temporary.

Plus, the good news is that lenders legally need your permission before running a hard credit check, meaning they can’t just mess up your score without you knowing. As long as you stay on top of your credit and manage it responsibly, you can keep the effects of these checks to a minimum.

How long does a hard credit check stay on your record?

A hard credit check sticks around on your credit report for up to two years, but don’t worry, it only impacts your score for the first 12 months, and usually, it’s just a small drop. After that, as long as you keep up with payments and manage your credit responsibly, your score should bounce back. In fact, if you stay on top of repayments and avoid applying for more credit within this time, that hard check could even boost your score over time, showing lenders that you’re a responsible borrower.

Related: Surprise Factors That Could Affect Your Credit Rating

Soft vs hard credit checks: a comparison

Soft and hard credit checks both serve a purpose for lenders when assessing your financial health. Soft checks help you shop around without affecting your score, while hard checks dive deeper and may have a temporary impact. The key is to stay in control, be mindful of when a hard check happens, manage your credit wisely, and you’ll keep your score in great shape.

At Sunny, we use a soft credit check to give you a tailored list of lenders and loan options that fit your needs when you apply for a loan quote. This way, you can find the perfect loan without worrying about it affecting your score. A hard credit check will only be made by a lender once you have picked and applied for a specific loan, and always with your permission.

Sophie Fessey