Whenever you take out a financial product such as a loan, mortgage, credit card or utility service, the lender will carry out a credit check as part of the application process. This is to check that you are creditworthy according to their acceptance criteria. But there are two different types of credit checks and they have different effects on your credit file. Read on to find out what you need to know.

What is a soft credit check?

A soft credit check is also known as a soft credit search, and it cannot be seen on your credit report by any third parties. This type of check often tends to be used as part of price comparison services. For example, comparison websites might ask if you wish to have a soft credit check to see how likely you are to be accepted for a certain product. They will always ask for your consent before carrying out this check, but it doesn’t leave a footprint on your record.

They can also be used by your potential employer when you’re being screened for a job.

What is a hard credit check?

In contrast, a hard credit check is carried out by a lender at the point of application, and it does leave a footprint on your credit record. This in itself isn’t a bad thing as it records all credit applications that you make, but this information may be used by lenders to check for patterns of behaviour. For example, if you had too many hard credit checks in a short period of time, it might suggest that you were experiencing financial issues and looking to increase your access to credit.

What are the key things to know about a soft credit check?

Here are some important things to know about soft credit checks.

• They are usually used to help determine whether you would be accepted for a financial product such as a credit card or loan.

• Soft searches do not appear on your credit history and they have no influence on your credit rating.

• Soft searches can also be used to generate a mortgage in principle if you are looking to buy a property. They are a good indication of whether or not an applicant is prepared and in a financially healthy position to take on a loan.

• When you apply for the financial product that you are interested in, the lender will carry out a hard credit search to make a decision on your application, and this will show on your credit record.

It’s useful to understand how credit checks vary, so you can help to keep your credit history as healthy as possible. In conclusion, soft credit searches are unlikely to impact your credit report and they can be a useful tool to help you to decide which products to apply for.

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