Are you planning to apply for a loan, credit card, or financial contract? When you apply, lenders complete credit checks to assess your financial history. This includes a hard credit check (also called a hard search).
Here, we’ll explain what that means and how it may affect your own credit report. We’ll also cover the difference between hard and soft credit checks and how they impact your credit score.
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What Is a Hard Credit Check?
A hard credit check is a thorough review of your credit report. This happens when you apply for a loan or any sort of credit. It’s conducted by a lender or credit provider to evaluate your creditworthiness. Account history lenders use the hard credit search to assess if you’re likely to repay what you borrow. Even mobile phone companies will perform a hard credit search when you apply for a contract.
A hard credit search involves examining your full credit report. This includes your personal and financial information. Credit reference agencies like Experian, Equifax, and TransUnion provide this information to lenders.
Unlike soft credit checks, hard credit checks leave a visible mark on your credit record that other lenders can see. This helps them know you’ve recently applied for credit elsewhere.
When Do Companies Perform Hard Credit Checks?
Companies conduct hard credit checks in various situations. Here are common scenarios when a hard credit check might occur:
Examples of a hard credit check include the following:
- Applications for loans, including short term loans and bad credit loans
- Applications for credit cards and credit card eligibility checks
- Mortgage applications and mortgage agreements
- Property rentals through letting agencies
- Car finance applications
- Taking out a mobile phone contract
- Utility companies setting up new services
- Rental property applications
Hard credit checks are an in-depth check of your borrowing history. They show lenders how you’ve managed your past financial history and help them decide about offering credit to you.
What Does a Hard Credit Check Show?
When a lender performs a hard credit search, they can see:
- Your credit history and credit record
- Current and past loans or credit accounts
- Payment history, including any missed payments
- Public court records related to debt
- Bankruptcy or debt collection information
- Your current credit limits and balances
- Other recent credit applications
- Personal details including your name, address, and whether you’re on the electoral register
- Employment status and financial history
This full view helps lenders see if you manage accounts well and decide if you’re a good fit for new credit.
What is the Difference Between a Hard Credit Check and a Soft Credit Check?
A hard credit check differs from a soft credit check or soft credit search. Soft credit searches are more of a background check. They confirm your personal details and give companies a general overview of your financial situation without the detailed scrutiny of a hard check.
Soft credit checks don’t affect your credit score, while hard credit checks can temporarily lower it.
Examples of soft credit checks are:
- Quotation checks – when you’re looking for insurance or credit quotations
- Price comparison websites checking rates for you
- Insurance checks – insurers often do a soft credit check when offering you insurance on a monthly payment plan
- When you check your own credit score or own credit report
- Pre-approval checks for credit card eligibility
- Identity verification by other service providers
The key difference between soft and hard credit checks? Soft credit checks don’t leave a mark on your credit file that other companies can see. With hard credit checks, they will see your application history.
Many lenders offer soft search options before you actually apply. This allows you to check if you’re likely to be approved without affecting your credit score.
How Does a Hard Credit Check Affect Your Credit File?
Every time a company carries out a hard credit check, a mark is left on your credit file. This is sometimes referred to as a footprint. This check will be recorded on your credit file whether your application is successful or not, but it won’t show the outcome of your application.
This mark tells other lenders that you’ve made an application for some sort of borrowing or contract. Too many credit applications in a short period can signal financial difficulties to lenders.
Multiple hard credit checks in a short period can significantly affect your credit score. This may reduce your chances of being approved for credit in the future.
How Many Points Does a Hard Credit Check Take off Your Credit Score?
When a hard search is added to your credit file, it’ll remove points from your credit score. The amount it removes will vary depending on the credit reference agencies. There are three major ones: TransUnion, Experian and Equifax.
A single hard inquiry will usually take fewer than five points off your FICO Score, with this score impact remaining for up to a year. If you make a few applications close together, your credit score could drop quite significantly. This could result in a lower credit rating.
Multiple applications noted on your credit file close together could be a warning sign to other lenders. It could signal that you’re struggling with financial difficulties or that you’re not managing your money well. This may influence their decision when considering you for credit.
Remember, with a poor credit score, it’ll be much harder for you to access new credit. Lenders typically offer their best rates to low risk applicants with good credit scores.
How Long Does a Hard Credit Check Stay on My Credit Report?
A hard credit check will stay on your file for up to two years. In most cases, it shouldn’t affect your credit score for more than a year, with the impact diminishing over time. After two years, the hard credit check will be automatically removed from your credit report. It will no longer affect your credit score.
Is a Hard Credit Check Bad for My Credit?
A single hard credit check isn’t necessarily bad for your credit. In fact, it’s a normal part of applying for financial products. The real concern comes when you have multiple hard credit checks in a short period.
Several hard inquiries in a short time can:
- Lower your credit score temporarily
- Signal to lenders that you might be a higher risk
- Reduce your chances of approval for new credit
- Potentially lead to higher interest rates
However, some types of shopping for rates (like mortgage or auto loan) may be treated as a single inquiry if done within a short period (typically 14-45 days), depending on the credit scoring model.
Can I Check My Own Credit Score Without a Hard Credit Check?
Yes! Checking your own credit score or reviewing your own credit report is considered a soft credit check. You can check your score as often as you like without any negative impact. You can use credit reference agencies like Experian to check your credit score for free without a hard credit check.
Regular monitoring of your full credit report can help you spot errors, potential fraud, and track your progress as you build your credit history.
Tips to Minimise the Impact of Hard Credit Checks
Here are some ways to reduce the impact of hard credit checks on your credit score:
- Space out your credit applications: Try to wait at least 3-6 months between applications.
- Use pre-qualification tools: Many lenders offer soft credit searches to check your likelihood of approval before you formally apply.
- Do your research: Compare loans and credit cards using price comparison websites that use soft searches.
- Apply only for credit you’re likely to get: Check eligibility criteria before applying.
- Consider your timing: If you’re planning to apply for important credit (like a mortgage), avoid other credit applications for at least 6 months beforehand.
- Rate shop efficiently: When shopping for specific loans like mortgages or car finance, try to complete all applications within a 14-day period, as many scoring models will count these as a single inquiry.
- Monitor your credit regularly: Check your credit report to ensure all hard inquiries are legitimate.
In Summary
Before you apply for a new loan or before taking out any new contract, think about the timing. Have you applied for a loan or taken out a new contract within the last month or two? If so, consider whether you could delay applying for another one – at least for a couple of months. That way it’s less likely to significantly affect your credit score and future lending decisions.
Remember to keep an eye on your credit score and, if possible, take action to improve your rating. The better your credit score, the easier it is to get credit and to manage your money.
Disclaimer: Please note, we are not providing financial advice. Our blogs are written for informational purposes only.