The Difference Between Soft And Hard Credit Checks

If you’ve ever applied for a loan or a credit card, you may have come across the terms “soft credit check” and “hard credit check.” But what does this mean? And more importantly, what’s the difference between the two? Let’s take a closer look at hard vs. soft checks.

Quick Answer - Soft vs Hard Credit Checks – What’s the Difference?

Hard credit checks leave a visible mark on your credit file and may reduce your score, whereas soft credit checks leave no visible footprint and have no impact.

How Do Credit Checks Work?

Summary: Credit checks work by lenders reviewing your credit history, borrowing behaviour, and personal details to assess whether you can afford and manage credit.

When a lender checks your credit, they'll ask you for some personal information. They can only do this for a good reason. Lenders use credit checks to decide if they should give you a loan.

They look at things like:

• Your credit score
• How many loans or credit cards you have
• How much you use your credit
• Your income and expenses
• If you pay your bills on time
• If you're registered to vote and how long
• If you've moved recently
• If you share finances with someone with bad credit

You can check your credit score online. The main credit reference agencies are Experian, Equifax, and TransUnion. Some websites, like ClearScore, let you check your credit score for free. 

Who Can Check Your Credit?

Summary: Banks, lenders, utility providers, landlords, phone companies, and some employers can check your credit when you apply for certain products or services.

Lots of places can check your credit, but it depends on what you're applying for. Here are some examples:

• Banks and building societies
• Lenders (like car finance companies)
• Utility companies (gas, water, electricity)
• Landlords
• Mortgage companies
• Phone companies
• Some employers (but they can't see your whole report)

Companies only check your credit for a good reason, like when you apply for a loan or credit card.

What Is A Soft Credit Check?

Summary: A soft credit check is a basic review of your credit information used for eligibility checks that does not affect your credit score or appear to lenders.

A soft credit check is like a quick peek at your credit history. It doesn't show up on your credit report, so it won't hurt your credit score. Lenders use soft credit checks to get a general idea of how good your credit is. They might check if you owe money or if you pay your bills on time. When a lender does a soft credit check, they can see things like your name, address, and what you owe. They don't look too closely at your money history. This kind of check is usually for things like store credit cards or phone contracts.

What Is A Hard Credit Check?

Summary: A hard credit check is a full assessment of your credit history carried out during a formal application that appears on your credit file and may lower your score.

A hard credit check is like a deep dive into your finances. It shows up on your credit report and can make your credit score go down a little bit in the short term. Lenders do hard credit checks when they want to know a lot about your money. They might check how much you've borrowed and if you paid it back on time. This gives them a full picture of your financial history. Hard credit checks are like a magnifying glass for your finances. They're used when you're applying for big things like loans, car finance or credit cards.

At Marsh Finance, we only do a hard credit check after you've found a car you like, we've approved you for a loan, and you're ready to get the car. At Marsh Finance, we only do hard credit checks when you’re ready to sign on the dotted line for your car, so you don’t have to worry about unnecessary checks hurting your credit score. Want to check your eligibility without impacting your credit score? Get your budget here!

Why The Difference Between Soft And Hard Checks Matters

Summary: The difference matters because multiple hard credit checks can harm your credit score, while soft checks allow you to check eligibility safely.

Knowing the difference between soft and hard credit checks is important to protecting your credit score. It’s important to avoid hard credit checks unless you are absolutely committed to a loan. Shopping around safely is important, and avoiding unnecessary hard searches should be prioritised.

FAQs

How Long Do Hard Credit Searches Stay On Your Credit File?

Hard credit checks stay on your credit report for 12 months after you apply for something. That's why it's important to keep them to a minimum.

How many hard credit checks are too many? It depends on the lender, but we suggest no more than six a year.

How Long Do Soft Credit Searches Stay On Your Credit File?

Soft credit checks don't show up on your credit report, so you can do as many as you want. You’ll be able to see all soft credit checks in the past 12 months.

How can I check my credit score?

You can monitor hard credit searches by checking your report with Experian, Equifax, or TransUnion.

Curious About Your Chances Of Being Approved For Car Finance?

Use our free pre-approval tool to see how it might affect your chances of getting car finance. It won't hurt your credit score.

Marsh Finance Limited are a lender, not a broker.

This is for illustrative purposes only and is not a quote or an offer of finance.