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Applying for credit, or just making an enquiry about credit, will involve a credit search.When credit searches are made, these will either be hard credit searches or soft creditsearches. But what are the differences between the two?
Soft credit searches - if shopping around for deals that need credit, such as usingcomparison websites, a softcredit search is unlikely to have any effect on your credit score. Soft creditsearches are often based on information you supply for lenders to work out if you’reeligible for credit. You can make a soft credit check for car finance, personal loans ormortgages if comparing the best deal, for example.
Hard credit searches - if you're making an application to a company for credit, and signingup to a credit agreement, they may look for more information from your credit report. Thisis known as a hard credit search. A hardcredit search can gather more information from your financial history. This allows acompany to see if there are markers on your credit report such as continued late payments,defaults or CountyCourt Judgements(CCJ). Third parties cannot perform a hard credit search on youwithout your permission.
Can credit searches affect your credit score?
If you apply for credit from a company, they may require more information about you, andperform a hard credit search. All hard searches will appear on your credit report and if toomany are made in a short period of time, it may affect your credit score. Conversely, softcredit searches won’t affect your credit score.
What kinds of companies do credit searches?
There are many different organisations that cansee your credit report. Some of these include financial services such as banks, aswell as other lenders and creditors. Other businesses who can perform a credit searchinclude utility and mobile phone providers, insurance companies and debt collectionagencies. Unless your permission is granted for a hard credit search, these are most likelyto be soft searches. These organisations get their credit reports from credit referenceagencies.
How to get your credit score
It’s not just businesses and organisations that can use credit reference agencies tomake credit checks. You can also check your credit information using a credit referenceagency too. Equifax Report & Score allows youto see your credit score and also enabled you to see which areas need attention using theeasy to follow traffic light system.
This article was written on 1st March 2022; all information was correct at the time ofwriting. Visit our Knowledge Centre for more on loans andcredit.
