Debt Management and Your Credit Score

What is a Credit Check? Soft and Hard Checks Explained

Learn everything you need to know about soft and hard credit checks and how they can impact your financial freedom.

Person checking their credit score on a laptop

From bank accounts to homes and loans, credit checks can have a huge impact on the opportunities available to you in life. But there are also a lot of myths surrounding them, so it’s worth researching the topic if you’re unsure.

You can find out what credit checks are and what they show below, as well as the difference between soft and hard credit checks.   

What is a Credit Check?

Also known as a credit search, a credit check is when a company looks at your credit report to find out more about your financial history. There are two different types of credit checks – soft and hard – and lots of different factors that they look at. The overall aim, however, is to get an idea of your ability to manage money.

Having a strong credit rating can make your life easier and more affordable, whether you want to rent a flat, buy a car on finance or simply open a bank account.

But if a credit check uncovers a poor or non-existent credit history, the opportunities available to you in life may be heavily reduced.

Who Carries Out Credit Checks?

There are a range of companies that can check your credit report, including:

  • Banks and building societies
  • Credit providers, such as credit card companies and loan lenders
  • Utilities suppliers
  • Letting agents and landlords
  • Mobile phone companies
  • Employers

Any company that checks your credit report must have a legitimate reason to do so – for example, if you’ve applied for a loan. You can also check your own credit report for free without damaging your credit score.

When Might You Need a Credit Check?

Loans, mortgages and credit cards

Credit lenders carry out credit checks to understand how reliable you are with money before they agree to lend to you. Your credit rating and the information in your report can influence whether they approve your application, and if so, what interest rate you pay.

Having a strong score will improve your chances of being approved and accessing lower interest rates as you’ll be seen as less of a risk to lend to.

Other credit agreements

From mobile phones to cars and furniture, there are various other items you might choose to buy through a credit agreement instead of paying upfront in full. A credit check will tell the provider how likely you are to keep up with the repayments based on your financial history.  

Landlords and letting agents

If you’re looking to rent a property, it’s common for landlords and letting agents to perform credit checks to judge whether you can be relied upon to pay your rent in full and on time.

Employers

You can also be subject to credit checks when looking to gain employment in certain professions and roles. Law and finance firms are legally required to perform checks, while other companies may also ask to carry them out if your role involves directly dealing with money.

What Does a Credit Check Show?

Your credit score itself is based on a range of different information that’s included in your credit report. Factors visible to anyone carrying out a credit check include:  

  • Your name and date of birth
  • Your current address and address history
  • Whether you’re on the electoral register in your local area
  • Any existing credit commitments such as credit cards and loans, plus any missed or late payments
  • Any financial links to other people – for example, if you have a joint bank account or joint mortgage with someone else
  • Public records, for example, if you’ve had a County Court Judgement or declared bankruptcy
  • Whether you’ve applied for credit recently

It’s wise to make sure the information in your credit report is up to date and free from errors. If it’s not, you could have a lower rating than you deserve and fewer financial opportunities as a result.

What is a Soft Credit Check?

As the name implies, a soft credit check is a quick check that only looks at basic information and can’t affect your credit score or ability to get credit.

Companies and employers sometimes carry out soft searches when doing initial background checks. You can also use them to get an idea of your chances of being approved for credit before you apply.

Soft credit checks aren’t visible to other companies carrying out credit checks and cannot be used to influence their decisions.

What is a Hard Credit Check?

Also called a full credit check, a hard credit check involves a company looking at all the information available on your credit report. Hard credit checks leave a mark on your credit report that’s visible to other lenders. They can affect your credit score and your ability to get credit.

Hard credit checks usually stay visible on your report for 12 months. These checks usually happen when a company is deciding to lend you money or another form of credit, and the outcome of these checks is visible on your report too.

Going through a lot of hard credit checks in a short period can suggest you’re having financial difficulties, especially if your applications were refused.  

Does Suits Me Carry Out Credit Checks?

Credit checks can impact people in lots of different ways, including their access to basic banking services. Having a low or non-existent score stops many people from even opening a traditional bank account. But thankfully there are alternatives, including Suits Me.

We offer an alternative banking solution with a prepaid Mastercard debit card and a mobile banking app. You can use them to do lots of the same things you might do with a regular bank account, like make payments, receive money and set up Direct Debits. The best part is you can do it all without a credit check!

We don’t offer credit in the form of credit cards, overdrafts or loans. Because you’ll never be borrowing money from us, there’s no need for credit checks to open an account.

Learn more about opening a Suits Me account online, with no credit checks whatsoever.  

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