Written by: Andy Townsend
Head of Marketplace Distribution, Consumer
20th January 2022
Lenders will run credit checks on your credit file if you’re applying for credit, such as a mortgage or a personal loan. This provides them with essential information about your financial circumstances, helping them to decide whether to lend to you.
It’s important to understand the impact of credit checks before you apply for finance. In this guide, we’ll explain what credit checks are, the difference between a soft credit check and a hard credit check, and how they might affect your credit score.
A credit check, also known as a credit search, occurs when a lender evaluates your credit report to understand your financial situation better. This helps them assess the likelihood that you’ll be able to manage your repayments.
Companies that may run a check on your credit report include:
A soft credit check (also known as a soft search) allows providers to check your credit report without leaving a visible footprint for other lenders to see. Only you can see soft search credit checks, such as identity checks and quotations, on your file.
At Shawbrook, when you apply for an instant quote with us, we use a soft credit search to offer you a guaranteed rate with no impact on your credit score. You can review the quote and shop around before deciding if it’s the right option for you. We will only carry out a hard credit search if you proceed with the loan application.
A hard credit check (also known as a hard search) happens when a lender searches your entire credit report, usually in relation to a credit application. Your file shows vital information to help providers determine how much credit you have, how you manage it, and your credit history.
This type of credit search leaves a footprint on your file which is visible to any company searching your file. If your report shows too many hard credit checks over a short period, it could affect your credit score, and some lenders may consider you a higher risk.
At Shawbrook, we run a soft search when you request a quote. We only use a hard credit check if you proceed with your credit application.
We’ve covered the two types of credit searches and how they might affect your credit score.
Let’s summarise the key differences between a soft and hard credit search.
Soft credit searches:
Hard credit searches:
Most hard credit checks remain visible on your credit file for 12 months or longer, so it’s beneficial to minimise credit applications if you’re looking to borrow money.
To avoid hard credit checks on your file, consider using an eligibility checker before applying for credit. By establishing whether you have a good chance of getting accepted, you can apply for credit only when you are more likely to be approved.
If you’ve applied for a loan and been refused credit, it could impact your credit score. Find out more information in our guide to maintaining a healthy credit score.
Here at Shawbrook, we believe in transparency. That’s why when you apply for an instant quote with us, it won’t impact your credit score and we’ll give you a clear picture of your guaranteed and personalised rate right from the start. We use a soft credit search that doesn’t leave a footprint on your credit report, giving you the freedom to shop around and decide whether a personal loan is right for you. We will only run a hard credit search if you choose to proceed with our loan application.
All loans are subject to status. The interest rate offered will vary depending on our assessment of your financial circumstances and your chosen loan amount. Terms and conditions apply.