Are you thinking of applying for a loan, Credit card, or any type of financial contract? If you are, then the company you’re applying with will want to carry out a hard credit check or also known as hard search.

Here we’ll explain what this means and how it’ll affect you.

What Is a Hard Credit Check?

Whenever you apply for a loan or any sort of credit, a hard credit check is carried out by a lender or credit provider.

Examples of a hard credit check include the following:

• Applications for any type of loan, including short term loans and bad credit loans.
• Applications for credit cards.
• Mortgage applications.
• Taking out a monthly phone contract.

The reason companies do a hard search is because it gives them an in depth look at your credit history. It allows them to see how much debt you’re in and how you’ve managed your repayments in the past. It shows them how responsible you are with your money. This information helps them to decide if they can lend to you.

What is the Difference Between a Hard Credit Check and a Soft Credit Check?

It’s important you don’t get a hard credit check confused with a soft credit check or soft search. A soft check is more of a background search. It confirms your personal details and gives a company an overview of your financial situation. It doesn’t go into as much detail as a hard check would. Not all lenders will do a soft search, but if they do, it’s to ensure you meet their lending criteria.

Examples of a soft credit check are:

• Quotation checks – if you’re looking to see what prices you can get for a loan or insurance
• Insurance checks – often insurers will do a soft credit check to check your ID or when they are offering you insurance on a monthly payment plan
• When you check your own credit report

The key difference between a soft and hard credit check is that a soft one doesn’t leave a mark on your credit file that other companies can see. So, with a soft credit check, other companies won’t see that someone’s looked at your credit file.

Now you know what a hard credit check is, how does it affect you? Let’s find out.

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 what the outcome of your application was.

This mark on your file tells other companies that you’ve made an application for some sort of borrowing or contract.

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. To see how much by, you should check each of the major credit ratings agencies: TransUnion, Experian and Equifax. If you make a few applications close together, your credit score could drop quite a lot. This could result in you having a lower credit rating.

A few applications noted on your credit file close together could be a warning sign to other lenders. It could signal to them that you’re struggling to pay bills or that you’re overspending. It could indicate that you’re not managing your money well and may influence their decision to lend to you.

Remember, with a poor credit score, it’ll be much harder for you to borrow. It could also mean you have to pay higher rates of interest.

How Long Does a Hard Credit Check Stay on My Credit File?

A hard credit check will stay on your file for a few years but in most cases, it shouldn’t affect your credit scores for more than a year.

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, think about whether you could delay applying for another one – at least for a couple of months. That way it’s less likely to have as big an effect on any lending decision.

Remember to keep a check on your credit score so that you can do what you can to keep it in high figures. 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.