The difference between a soft and hard credit check

If you are applying for a loan, bank account or credit card, you may come across an alert that the business will need to first run a credit check before approving you.  

They may run either a soft credit check or a hard credit check. The difference is subtle, but very important. And if you are trying to improve your credit score, it can be good for you to know the difference.

 

What are credit checks and credit scores

A credit score signals your trustworthiness of making repayments on time and in full. Almost every adult has a credit score, which is calculated based on information pulled from your credit history, such as how often you pay your bills.

A good credit score is an indicator that you are trustworthy with a loan. It signals that you are good at paying back your debt on time, in full, and aren’t likely to default on payments.

A bad credit score sends the opposite signal. It makes lenders wary of offering you money, or they may offer loans at an above-average interest rate.

Companies will want to know your credit score whenever you apply for a credit card or loan, and sometimes for a job. To determine your credit score, they will use any of the UK’s three credit rating agencies to run the credit check. 

What’s the difference between soft and hard searches? 

If a company or lender says they are going to run a credit check, they should specify if it is a hard check or soft check. If the company does not specify, there are ways to make an educated guess

 

Hard searches

When an agency runs a hard credit check, evidence of that search remains on your credit report for two years. 

Lenders of credit such as for a mortgage, auto loan, or credit card generally run hard searches as part of their decision-making process. 

The occasional hard search is fine. However, many hard searches can impact your credit score. It doesn’t matter if you were approved, future creditors will simply wonder why there are so many searches on record within a short time frame. For them, it is a red flag that you have financial troubles. For this reason, it is advised not to apply too often.

And since you will not want rejected applications on your record either, try not to aim too high (such as applying for the best credit card or a low-interest loan if you have a bad credit history).

 

Soft searches

Unlike hard searches, soft searches leave no trace.

Examples of soft searches are when you or an employer check your credit score, or when a lender like an insurance company, credit card company and most buy now pay later companies checks your credit to pre-approve you for an offer. 

Because they are not linked to a specific application, the searches do not impact your score, nor are they visible to future credit checkers.

 

Check your own credit score without worry

You can check your own score as many times as you like, whenever you like, without concern. 

All three UK credit agencies are required to provide you with a free credit score check as often as once a month. They are Experian, Equifax and TransUnion. They largely use the same formula, so a score from any one should suffice.

If you are worried about your credit score, the credit reports they provide can also reveal your biggest problem areas like missed payments, unpaid debt, or maybe your account is linked with an ex-financial partner who is dragging down your score. Use this as a guide for your next steps.

If you want to improve your credit score, there are many ways to improve it, even without a credit card. And you can use Money Dashboard to help keep track of your bills and debt in order to ensure your credit score isn’t impacted.

Disclaimer

All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice". Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

Get started today with Money Dashboard

Money Dashboard will help you discover where your money is going, start saving and plan for the future - for free

Related articles

Download app