The Difference Between Soft and Hard Credit Checks

If you're looking to take out some form of finance, the likelihood is you would have come across these terms.

Whenever you take out a finance loan, the credit lender will look at your financial history to determine whether or not you will be able to pay the loan back over time.

Whether it be for your mobile phone, a personal loan you've taken out, or a car, lenders will scrutinise your credit history, for their benefit as well as yours.

They not only want to ensure you can pay them back but that you won't spiral into debt because you can't afford the repayments.

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You will be asked to provide information to help formulate your loan, including your annual income, any loans you're currently taking out, and if you have any dependents.

A lender may also look at the financial history of people you are financially associated with, for example, if you share a mortgage or have a joint bank account with someone. 

Soft credit check

A soft credit check is what a lender will do to get an understanding of whether your loan application will be successful.

They will be looking to see if you are up-to-date with any other repayment plans or if you are in any sort of debt or unable to pay back particular loans.

A soft credit check will not affect your credit score as only you will be able to see on your credit report that one has been done by a lender, so no other lenders will be able to see that you've had one undertaken.

It's not a deep dive into your credit history by any means, and will only show them what you yourself can see on your reports, such as your current credit or debt, any other financial loans you've taken out, and your general payment history.

When you are trying to apply for a loan from your bank or to buy a car, for example, when you have filled in your details and hit apply, a very rapid soft check will be done on you before you see the results available to you.

A hard credit check then comes into play once you have hit the apply button and continued your application, and this is the point when more information will be looked at by the lender.


Hard credit check

A hard credit check is what a lender will do when they want to find out more granular information about your financial credit history and credit score.

This will show up on your credit report and can be seen by other lenders who will be aware if/when you have previously applied for a loan.

It's therefore important that you should only proceed with an application if you are certain it's for you because you don't want any negative hard credit checks left on your report as it could harm any future applications.

This type of check will be able to uncover if you've missed any payments in the past or if you've previously been declined for other loans.

As previously mentioned, a hard credit check will generally only be done once you decide to proceed with a purchase or application and after the soft check has already happened.

More often than not, hard checks will stay on your report for around 12 months, so if you are applying for a mortgage or car finance for example, and are worried about what a hard check might uncover from several years ago, you should be fine.

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The reason why a hard check affects your credit score is that it shows other lenders that you have previously applied for a loan, and having too many hard checks in a short space of time could indicate that you are in a little bit of personal debt and could be liable to miss future payments.

It's important to try and build your credit score as the lower it is, the more chance you'll have of being declined or offered a much higher interest rate than someone with a better score.


Is credit score based on credit history?

The longer your credit history of making payments on time and not making too many loan applications, the greater your credit score will be.

What is the average credit score in the UK?

According to Experian, the average credit score in the UK is 797 out of 999. Depending on which credit agency you use depends on what your score is out of, as some others rank it out of 710.