What is a credit check?
22 min read
Credit checks are a routine part of applying for financial products and services in the UK, whether it's a credit card, loan, mortgage or even a mobile phone contract. Find out everything you need to know, including the difference between soft and hard checks and how they affect your credit score (opens in a new tab).
Key takeaways
A credit check is when a company looks at your credit report to understand how you've managed money in the past.
Soft checks are done to initially check your eligibility, whereas hard checks usually come with full applications and leave a visible record on your report.
Hard checks can affect your credit score, so it's wise to think about how and when you apply for credit.
What is a credit check?
A credit check, also known as a credit search, is when a company accesses data from your credit report to review your financial behaviour and history.
Whenever you apply for credit or certain financial services, the company you apply with will request information from one or more Credit Reference Agencies: Experian (opens in a new tab), Equifax (opens in a new tab) or TransUnion (opens in a new tab). This covers things like your existing credit accounts (credit cards, loans, mortgages etc) and payment history. By understanding how well you've managed bills and debts in the past, companies can decide whether to approve you and on what terms.
Why do lenders carry out credit checks?
Lenders and other organisations like utility companies, mobile phone providers and landlords use credit checks to measure the risk of lending to you. They show how well (or poorly) you've managed credit recently, and help lenders assess how likely you are to manage any new credit in the future on top of existing commitments.
Typically, the best rates and higher credit limits (opens in a new tab) go to lower-risk applicants with strong credit histories.
It's not all about managing financial risk for lenders, though. Credit checks are designed to protect borrowers too. They're part of the Financial Conduct Authority's responsible lending guidelines and aim to stop you from taking on more debt than you can handle.
When might you need a credit check?
Common situations that require credit checks include:
Applying for a new line of credit, like a credit card, personal loan or mortgage
Opening a bank account, especially one with an overdraft
Financing a car on a personal contract purchase (PCP) or hire purchase (HP) agreement
Taking out insurance and paying monthly, as this is effectively a credit agreement for the annual premium
Setting up a utility account or mobile phone contract, as pay-monthly services involve companies providing services before payment
Renting a property
Applying for jobs in certain sectors like financial services.
What is a soft credit check?
A soft credit check, also called a soft search or soft inquiry, is a preliminary look at select information on your credit report, rather than the whole file. Importantly, they don't impact your credit score (opens in a new tab) and aren't visible to other lenders who may later view your report. Only you can see them.
As well as you monitoring your own report, this snapshot is often used for pre-approval or eligibility checks. For example, our QuickCheck (opens in a new tab) tool helps you see if you'd be approved before you apply for a credit card and add a hard search to your file. You might also undergo a soft check to collect insurance quotes on price comparison sites, or when requesting a mortgage in principle before viewing properties to potentially buy.
You can't 'fail' a soft credit history check as they're not tied to a formal application, and you can have as many as you like without any negative impact. But they're not a guarantee. If you go on to formally apply for something, that's when a hard check comes into play.
What is a hard or full credit check?
A hard check or search is a full examination of your credit report that happens when you apply for credit or some other financial services. Unlike soft checks, they're recorded on your credit report and are visible to other companies who look at your file in the future, typically for 12 months. This usually includes the name of the company that checked you and the date.
Companies need your permission to do a hard credit check, so you'll usually tick a box or agree to terms before it's done. A single hard check can lower your credit score temporarily, and having too many in a short period can be a red flag to lenders.
Soft vs hard credit checks at a glance
| Soft credit check | Hard credit check | |
|---|---|---|
| Purpose | Initial enquiry for quotes, eligibility or personal credit monitoring | Formal enquiry for a full credit application, used by companies to make a final lending decision |
| Common scenarios | Checking your own report, pre-approval or eligibility checker, getting insurance or loan quotes, identity verification, employer background checks | Applying for a credit card, loan, mortgage, overdraft, car or retail finance, or flat rental, or signing up for utilities or phone contracts |
| Visibility on report | Visible only to you | Visible to anyone who checks your report, usually for two years, but only impacts your score for 12 months |
| Permission required | Not strictly needed (though companies need a legitimate reason and usually still tell you upfront) | Legally requires your authorisation |
| Impact on credit score | No impact whatsoever | Possible slight drop in score temporarily, often worsening with multiple hard searches in a short time |
This comparison shows why it's generally a good idea to use soft searches to shop around for credit products like credit cards and loans. Then, you can continue to do a hard search when you're ready to apply for something specific.
What information is needed for a credit check in the UK?
Your full report can include:
Credit accounts and repayment history: All your loans, credit cards, mortgages, overdrafts and some other types of account like utilities, along with how much you owe on each and how long you've had them.
Payment behaviour: Whether you've missed any payments or ever defaulted on a debt, plus your credit utilisation (how much of your available credit you're using ‒ find out more about credit limits (opens in a new tab)).
Public records: Any County Court Judgements (CCJs), bankruptcies, or Individual Voluntary Arrangements (IVAs) in the last six years.
Electoral roll information: Whether you're registered to vote at your current address.
Financial associations: Anyone you're financially linked to, for example through a joint bank account or mortgage.
Recent credit searches: A record of hard credit checks within the past 12 months.
If you have no credit history, your report will essentially be a blank file or show very limited information.
What happens when a credit check is done?
Here's a step-by-step rundown:
You apply for a credit product or service and give consent. Your consent is usually part of the application, along with some personal details.
The lender contacts a credit reference agency. They may contact one or more of Experian, Equifax and TransUnion. Some lenders have relationships with a specific agency, so may use them over others.
The credit reference agency returns your credit report. They'll match your details to their records, then return a digital report of your credit history including a score they've calculated. If it's a hard search, they'll also log an entry on your credit report.
The lender reviews your credit report and application. They typically input the details into their own credit scoring or underwriting system, along with any internal data or policies. If it's a hard credit search that leads to approval, they'll also decide what to offer you including the credit amount, interest rate and repayment term.
Decision and next steps. You'll receive an offer or you’ll be given a reason or advice for rejection. Either way, a hard credit search will stay on your credit report for two years. If it's a soft search with a positive outcome, you'll have the option to continue to a full application.
What else do lenders check beyond your credit report?
While your credit report is a big piece of the puzzle, lenders may also consider the following information when reviewing your application:
Personal and financial details you provide, including your employment status, income and outgoings, to calculate what you can realistically afford and how stable you are
Other identity details, like proof of identity (passport, driving licence) and proof of address (utility or council tax bills) to stop fraud
Your history with the lender (if you have one) could help your case if you've been a long-time customer with a good record.
To sum up, lenders check your credit history and your overall personal financial situation. All these elements can be crucial. For example, you're still likely to be declined if a credit check shows a great score but you state that you have no income.
Does a credit check affect your credit score?
Remember, a soft credit check has no effect on your credit score, even if you have lots of them in a short space of time. Lenders and other companies don't see them either, so they can't influence lending decisions later down the line.
A single hard check may cause your credit score to dip a little as a recent application for credit is a sign of slightly increased risk. More importantly, having too many different hard checks in a short time can start to noticeably lower your score and make lenders more cautious.
But hard credit checks don't carry as much weight as other factors affecting your score (opens in a new tab), like payment history and high credit utilisation. Plus, some credit scoring models treat multiple searches for the same product within a short window as one enquiry ‒ for example, if you get mortgage quotes from three banks within one week.
How long do credit checks stay on your credit report?
Most hard credit searches go on your credit report for two years, after which they drop off and are no longer visible to other companies checking your file.
You might be able to see soft searches on your report for up to a year or more. But remember, only you can see these in your report, so it’s nothing to worry about.
Again, it's worth remembering that hard credit checks aren't as big an issue as other factors that can stay on your report for much longer. For example, public records like bankruptcy or IVAs stick around for six years and will stand out more to lenders.
Can you get hard searches removed?
In most cases, no. You can't remove a legitimate hard check ‒ where you applied for credit and consented to it in the process ‒ just because you don't want it on your report.
There are a few rare exceptions where removal might be possible:
Error or mistaken identity: If a hard search truly has nothing to do with you, for example if someone mistyped their information or a lender ran a search by mistake.
Fraudulent application: If someone deliberately tried applying for credit in your name, suggesting identity theft.
If any of these issues happen to you, you should be able to dispute them with the lender or credit reference agency and have the search removed. If not, remember that hard searches lose their impact over time and disappear after a year.
How can you reduce the impact of hard credit checks?
Hard checks are a normal part of applying for credit. In many cases, they're beneficial in the long run. For example, if you take on a mortgage (requiring a hard search) and keep up the repayments over time.
But there are smart strategies to minimise the (relative) impact of hard checks on your credit score:
Space out credit applications. It's generally good practice to avoid making lots of applications in a short time, especially if they're for different types of credit or if you're rejected by one lender. This gives a chance for earlier applications to age and stops you looking overstretched.
Use soft-search eligibility checks. Tools like Capital One's QuickCheck let you find out if you'll be approved for a credit card without committing to a full application and potentially impacting your score. If an eligibility check suggests a low chance of approval, you can avoid applying and try finding something more suitable.
Improve other aspects of your credit rating. Indirectly, if your credit score is solid, the small impact from a hard search isn't a big deal. Working on fundamentals like paying bills on time and using only a moderate amount of your available credit should be enough to keep your score stable.
Take the next step with Capital One
Understanding how credit checks work and how to manage them wisely puts you in a great position to make informed financial decisions.
Capital One offers tools to help you along the way, whether you're checking your credit score with CreditWise (opens in a new tab) or exploring your eligibility for a credit card with QuickCheck (opens in a new tab). Both are free and have no direct impact on your score.