Soft Search vs Hard Search Credit Check
Tuesday, 03 November 2020
If you’re currently looking for finance, you may keep seeing the words ‘hard credit check’ and ‘soft credit check’ and wondering exactly what that means. They affect your credit report differently, so it’s really important to know the difference.
Throughout this article you will see hard credit check also referred to as a hard credit search, please do not worry as they mean the same thing. We will also refer to a soft credit check as a soft credit search, this too means the same thing.
A credit check is when a company looks at information held on you to understand your financial behaviour. This will be compiled into what is known as a credit report.
Companies will only look at your credit report if they have a legitimate reason to do so. An example might be because you’ve just applied for a loan, and they need to do a credit check so they can move forward with your application.
If you’re currently looking for finance, you may keep seeing the words ‘hard credit check’ and ‘soft credit check’ and wondering exactly what that means. They affect your credit report differently, so it’s really important to know the difference.
Throughout this article you will see hard credit check also referred to as a hard credit search, please do not worry as they mean the same thing. We will also refer to a soft credit check as a soft credit search, this too means the same thing.
A credit check is when a company looks at information held on you to understand your financial behaviour. This will be compiled into what is known as a credit report.
Companies will only look at your credit report if they have a legitimate reason to do so. An example might be because you’ve just applied for a loan, and they need to do a credit check so they can move forward with your application.
Below you can find an example of companies that may perform a credit search on you:
- Banks and building societies
- Credit providers
- Utilities suppliers (e.g. gas, water, and electricity)
- Letting agencies and landlords
- Mobile phone companies
- Employers (although they won’t see your full report)
A credit check can look into a number of things. Some of the reasons may be to see:
- If you’ve been paying your credit back on time
- How much credit you have, and how you’re managing it
- Checking your address and identity
They could also look at the credit reports of someone you are financially associated with, so for example anyone you have a joint bank account or mortgage with.
Below you can find an example of companies that may perform a credit search on you:
- Banks and building societies
- Credit providers
- Utilities suppliers (e.g. gas, water, and electricity)
- Letting agencies and landlords
- Mobile phone companies
- Employers (although they won’t see your full report)
A credit check can look into a number of things. Some of the reasons may be to see:
- If you’ve been paying your credit back on time
- How much credit you have, and how you’re managing it
- Checking your address and identity
They could also look at the credit reports of someone you are financially associated with, so for example anyone you have a joint bank account or mortgage with.
What is a soft credit check?
A soft credit check is an initial look to ascertain information on your credit report. Companies perform soft searches to decide how successful your application would be without conducting a hard search on your credit report.
Does a soft credit check show on your credit report? The answer is yes, but what you see on your credit report is different to what a company doing a check can see. A soft credit check can only be seen on your credit report by you. Which is why you can have as many soft searches on your credit report as you like without it affecting your credit score.
What is a soft credit check?
A soft credit check is an initial look to ascertain information on your credit report. Companies perform soft searches to decide how successful your application would be without conducting a hard search on your credit report.
Does a soft credit check show on your credit report? The answer is yes, but what you see on your credit report is different to what a company doing a check can see. A soft credit check can only be seen on your credit report by you. Which is why you can have as many soft searches on your credit report as you like without it affecting your credit score.
Are soft credit checks bad?
Soft credit checks are not bad. In fact, they are very useful. A soft credit check will not be visible on your report to anyone other than you but allows companies to see how eligible you are for credit products.
An example of this would be when you get a quote for vehicle finance on our website. You can fill in your information, click ‘apply,’ and be told in most cases almost instantly how much finance you could get, all by us just doing a soft credit check on your file. There are some exceptions that might mean we cannot do this, but we will make you aware if this is the case.
If after that point you then decided to continue with your application, then a hard credit check would need to be done. This is not the same for every lender, and some will do a hard credit check on you straight away, so please check with them before applying.
Are soft credit checks bad?
Soft credit checks are not bad. In fact, they are very useful. A soft credit check will not be visible on your report to anyone other than you but allows companies to see how eligible you are for credit products.
An example of this would be when you get a quote for vehicle finance on our website. You can fill in your information, click ‘apply,’ and be told in most cases almost instantly how much finance you could get, all by us just doing a soft credit check on your file. There are some exceptions that might mean we cannot do this, but we will make you aware if this is the case.
If after that point you then decided to continue with your application, then a hard credit check would need to be done. This is not the same for every lender, and some will do a hard credit check on you straight away, so please check with them before applying.
What is a hard credit check?
A hard credit check happens when a company makes a complete search of your credit report. Each hard check is recorded on your report, so any company searching will be able to see that you’ve applied for credit.
A hard credit check will often be done after a soft credit check, once you agree to commit to a financial product. In simpler terms it’s when you agree to buy the product. However, some companies can do a hard credit check at the point of application, so please do your research before applying.
Luckily most hard searches generally stay on your credit report for 12 months, although there are some exceptions to the rule as a debt collection can be seen for up to 2 years. Although an IVA, CCJ or Bankruptcy will leave a mark on your credit file for 6 years, the hard search for these will only stay on your file for up to 2 years.
What is a hard credit check?
A hard credit check happens when a company makes a complete search of your credit report. Each hard check is recorded on your report, so any company searching will be able to see that you’ve applied for credit.
A hard credit check will often be done after a soft credit check, once you agree to commit to a financial product. In simpler terms it’s when you agree to buy the product. However, some companies can do a hard credit check at the point of application, so please do your research before applying.
Luckily most hard searches generally stay on your credit report for 12 months, although there are some exceptions to the rule as a debt collection can be seen for up to 2 years. Although an IVA, CCJ or Bankruptcy will leave a mark on your credit file for 6 years, the hard search for these will only stay on your file for up to 2 years.
Hard credit checks can be carried out for lots of reasons, but the most common reasons tend to be:
- When you apply for a loan, a credit card or mortgage
- When you open a new utility account
- When you pay-monthly for a mobile phone contract
If you are ever not sure what type of account or company will do a hard credit check, then please speak to your provider before applying.
Why does a hard search affect your credit score?
Hard credit checks can be carried out for lots of reasons, but the most common reasons tend to be:
- When you apply for a loan, a credit card or mortgage
- When you open a new utility account
- When you pay-monthly for a mobile phone contract
If you are ever not sure what type of account or company will do a hard credit check, then please speak to your provider before applying.
Why does a hard search affect your credit score?
Simply put, a hard search signifies that you have applied for credit and shows to other lenders that you might be a financial risk to lend to. Applying for too much credit in a short space of time, shows that you might not be able to afford the repayments and can leave you with a bad credit score.
It’s important to understand that it isn’t just a hard search that can affect your credit score. It can be a number of things including whether you are on the electoral roll or even something as simple as if you’ve moved address several times in the last couple of years.
One hard credit check shouldn’t have too much of an impact on your credit score, especially if you are borrowing responsibly and you know you can keep up the repayments. However, having several hard credit checks appear in a quick succession can affect your credit score for six months and may reduce your ability to get approved for credit in the short term. For more information we’ve written a guide on what affects your credit score.
If your credit score is low and you have a lot of hard credit checks on your credit report, then lenders might offer you a higher interest rate if you are approved for a loan.
At Moneybarn, we will only ever perform a hard credit check on your credit file once you’ve found a vehicle you like and are ready to proceed with the finance agreement. At this point we will generate the documents needed to continue with your agreement, and this is when we will perform the hard credit search on your file.
Simply put, a hard search signifies that you have applied for credit and shows to other lenders that you might be a financial risk to lend to. Applying for too much credit in a short space of time, shows that you might not be able to afford the repayments and can leave you with a bad credit score.
It’s important to understand that it isn’t just a hard search that can affect your credit score. It can be a number of things including whether you are on the electoral roll or even something as simple as if you’ve moved address several times in the last couple of years.
One hard credit check shouldn’t have too much of an impact on your credit score, especially if you are borrowing responsibly and you know you can keep up the repayments. However, having several hard credit checks appear in a quick succession can affect your credit score for six months and may reduce your ability to get approved for credit in the short term. For more information we’ve written a guide on what affects your credit score.
If your credit score is low and you have a lot of hard credit checks on your credit report, then lenders might offer you a higher interest rate if you are approved for a loan.
At Moneybarn, we will only ever perform a hard credit check on your credit file once you’ve found a vehicle you like and are ready to proceed with the finance agreement. At this point we will generate the documents needed to continue with your agreement, and this is when we will perform the hard credit search on your file.
Difference between hard and soft credit search
Hopefully by now you are a more aware of the difference between a hard and soft credit check. But to sum up:
- Soft credit check – you can have as many of these on your credit file as you’d like. Only you can see these on your credit report.
- Hard credit check – minimise these as much as you can. One hard credit check may only impact your credit score slightly and will only show on your credit report for 12 months. Multiple hard credit checks could make you appear as a higher risk and you might end up with no credit or a higher APR.
Always do your research before you take any loan out, and make sure you understand what having bad credit could mean for you. Before applying see if there’s an affordability calculator on their website, this can give you an estimate of what you could borrow based off your current circumstances.
How to check your credit score
So, you are probably thinking after reading all of this information, ‘OK, but how do I check my credit score?’ Well, there are many ways you can check your credit score.
There are 3 different credit agencies that will provide credit checks to a variety of different organisations, and they all have websites or apps where you can check your credit report and score yourself:
Difference between hard and soft credit search
Hopefully by now you are a more aware of the difference between a hard and soft credit check. But to sum up:
- Soft credit check – you can have as many of these on your credit file as you’d like. Only you can see these on your credit report.
- Hard credit check – minimise these as much as you can. One hard credit check may only impact your credit score slightly and will only show on your credit report for 12 months. Multiple hard credit checks could make you appear as a higher risk and you might end up with no credit or a higher APR.
Always do your research before you take any loan out, and make sure you understand what having bad credit could mean for you. Before applying see if there’s an affordability calculator on their website, this can give you an estimate of what you could borrow based off your current circumstances.
How to check your credit score
So, you are probably thinking after reading all of this information, ‘OK, but how do I check my credit score?’ Well, there are many ways you can check your credit score.
There are 3 different credit agencies that will provide credit checks to a variety of different organisations, and they all have websites or apps where you can check your credit report and score yourself:
- Experian – it’s the most used credit reference agency. They have a website and an app that allows you to check your credit report and score. With the free version you can check your report once a month, but if you’d like to know more about your report and be given advice on how to build your credit you will need to sign up for a CreditExpert account which is £14.99 a month. Money Saving Expert’s Credit Club might be a good free alternative
- Equifax – The second biggest credit reference agency in the UK. You can check your Equifax report directly with Equifax or through a service offered by a different company called ClearScore. ClearScore is completely free and tells you when changes are made to your report throughout the month, as well as giving you free advice on how to better your score
- TransUnion – The third credit reference agency that you will need to check. You can check by using the TransUnion website or by using a website or app called Credit Karma. As TransUnion is not as widely used by lenders to check your report, its service isn’t quite as comprehensive as the others. You can however check your credit score for free, so it’s worth downloading
These different credit reference agencies and apps are designed to help you understand if you have bad credit, so use them to help you get a better score.
- Experian – it’s the most used credit reference agency. They have a website and an app that allows you to check your credit report and score. With the free version you can check your report once a month, but if you’d like to know more about your report and be given advice on how to build your credit you will need to sign up for a CreditExpert account which is £14.99 a month. Money Saving Expert’s Credit Club might be a good free alternative
- Equifax – The second biggest credit reference agency in the UK. You can check your Equifax report directly with Equifax or through a service offered by a different company called ClearScore. ClearScore is completely free and tells you when changes are made to your report throughout the month, as well as giving you free advice on how to better your score
- TransUnion – The third credit reference agency that you will need to check. You can check by using the TransUnion website or by using a website or app called Credit Karma. As TransUnion is not as widely used by lenders to check your report, its service isn’t quite as comprehensive as the others. You can however check your credit score for free, so it’s worth downloading
These different credit reference agencies and apps are designed to help you understand if you have bad credit, so use them to help you get a better score.
Frequently asked questions
How long do credit searches stay on your file?
A hard credit search will generally stay on your credit report for around 12 months.
A soft credit search will only be seen by you on your credit report, and not by third parties such as finance companies.
Does doing a credit check affect your credit score?
Doing a credit check on your own report does not affect your credit score. It’s only hard credit checks that may affect your credit score, and these can only be done by companies and not by you.
You can check your credit score and report as many times as you like. Your credit score will only get updated monthly, but some reports will show you if something has been added or changed before the month is up.
Why do credit checks impact your credit score?
It is only hard credit checks that potentially can impact your credit score. This is because when you take out credit it reduces the amount you can afford. This signals to lenders that you could be in financial difficulty and that you may be relying on borrowing money.
Hard checks are normal, and most people will take out finance or a loan at some point in their life. It is the amount of times that a hard check is done on your credit report that you need to be careful with. A hard check will stay on your file for 12 months, but if you keep the hard checks to a minimum then a hard check could affect your score less.
How many credit searches is too many?
There are some informational financial websites that suggest 6 is too many. They suggest that lenders won’t even consider you for finance if you have 6 hard credit checks on your report. As every lender is different, it’s important to only apply for finance that you have researched, and that you know you need so that you don’t damage your credit score.
How does a credit check work?
When a lender does a credit check they will request certain information on you. They will only do this if they have a legitimate reason to do so, and what they receive back will help them decide how responsible it is for them to lend to you.
They check how responsible it would be to lend to someone by looking at things such as:
- Your credit score
- How many loans you currently have
- How regularly you make repayments
- If you’re on the electoral roll
- Whether you have moved address in the last few years
What does a credit check show?
A credit check will show any financial accounts you have had within the last 6 years. This includes open and closed accounts. This will include:
- Credit cards
- Mortgages
- Loans
- Car finance
- Utility bills.
It also includes any public information records, electoral roll information and previous hard searches.
A credit check shows to a lender how responsible it would be for them to lend to you and if you have good or bad credit. As well as whether you can realistically afford the monthly repayments without putting yourself at risk of falling into debt or arrears.
Frequently asked questions
How long do credit searches stay on your file?
A hard credit search will generally stay on your credit report for around 12 months.
A soft credit search will only be seen by you on your credit report, and not by third parties such as finance companies.
Does doing a credit check affect your credit score?
Doing a credit check on your own report does not affect your credit score. It’s only hard credit checks that may affect your credit score, and these can only be done by companies and not by you.
You can check your credit score and report as many times as you like. Your credit score will only get updated monthly, but some reports will show you if something has been added or changed before the month is up.
Why do credit checks impact your credit score?
It is only hard credit checks that potentially can impact your credit score. This is because when you take out credit it reduces the amount you can afford. This signals to lenders that you could be in financial difficulty and that you may be relying on borrowing money.
Hard checks are normal, and most people will take out finance or a loan at some point in their life. It is the amount of times that a hard check is done on your credit report that you need to be careful with. A hard check will stay on your file for 12 months, but if you keep the hard checks to a minimum then a hard check could affect your score less.
How many credit searches is too many?
There are some informational financial websites that suggest 6 is too many. They suggest that lenders won’t even consider you for finance if you have 6 hard credit checks on your report. As every lender is different, it’s important to only apply for finance that you have researched, and that you know you need so that you don’t damage your credit score.
How does a credit check work?
When a lender does a credit check they will request certain information on you. They will only do this if they have a legitimate reason to do so, and what they receive back will help them decide how responsible it is for them to lend to you.
They check how responsible it would be to lend to someone by looking at things such as:
- Your credit score
- How many loans you currently have
- How regularly you make repayments
- If you’re on the electoral roll
- Whether you have moved address in the last few years
What does a credit check show?
A credit check will show any financial accounts you have had within the last 6 years. This includes open and closed accounts. This will include:
- Credit cards
- Mortgages
- Loans
- Car finance
- Utility bills.
It also includes any public information records, electoral roll information and previous hard searches.
A credit check shows to a lender how responsible it would be for them to lend to you and if you have good or bad credit. As well as whether you can realistically afford the monthly repayments without putting yourself at risk of falling into debt or arrears.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
