Not all credit checks end the same. Just like not all nights out end the same. Picture the scene…
You’ve had a great time with your friends, but now it’s home time. You get out of your taxi, silently open the front door, creep up the stairs like some kind of ninja, manage to get undressed and go to the loo in the dark before slipping into bed without even a peep from your partner. No one knows a thing but you.
Well, that’s just like a soft credit check, which a lot of lenders can now run. They’ll do a discreet pre-check of your application with the credit reference agencies and should be able to tell you whether you’re likely to be accepted or not, without anyone knowing about it but you.
Only you'll be able to see a soft search on your credit report, which means they don’t impact your credit rating at all, no matter how many you do.
Here’s some examples of when a soft credit check may be run:
- When you check your own credit report
- When a company runs an identity check on you
- When a lender pre-checks your eligibility for a new credit product
What does a hard credit check do then?
A hard credit check is more like when you skip down the drive while screeching ‘bye’ to your friends, drop your keys five times before slamming the front door behind you. You then crash up the stairs (turning on every light as you go!), flush the toilet, go digging under the pillow for your PJs, jump into bed (while being given the evils!) and proceed to snore your head off for the rest of the night. The whole house knows about it!
Well, when you officially apply for credit, lenders will run a hard check, which is a full credit check that leaves a mark on your credit report.
Not only will you be able to see this, but so will any other lender or company that looks at your report.
Are these ‘marks’ a problem?
If a lender looks at your credit rating and sees a few marks over the last year or so, it shouldn’t really be a problem. However, if you’ve been applying for credit left, right and centre, these marks could come back to haunt you. Just like your partner’s mood after a lack of sleep!
That’s because lots of marks in a short period can make you look like desperate for cash, or that you need to borrow money to stay afloat every month. This is a no-no in lenders’ eyes, so they’re more likely to reject you. You can read more about this here.
How do I know if it’s a soft or a hard credit check?
The easiest thing to do is to look out for an eligibility checker. The lender will usually state whether it impacts your credit rating or not. Most offer them these days but if you’re unsure, give them a call to double check first.
The eligibility checker will tell you if you’re likely to be accepted, just by putting in a few details.
If you get a yes, you can go ahead and apply with confidence.
If you get a no, you can try elsewhere (just make sure it’s another soft check), without worrying about damaging your credit rating.
Why do lenders need to check my credit report?
Lenders use your report to try and figure out how much of a risk you are to lend to before they make a decision.
If you’ve paid everything back on time and all of your personal details are correct and up-to-date, it’s likely you have a good credit rating and aren’t very risky to lend to.
If you’ve missed payments in the past and have lots of debt, you may have a poor credit rating and could be seen as riskier to lend to. If this sounds like you, it’s particularly important to try and avoid getting any more marks on your report, so look out for those eligibility checkers. Think ninja!
You can find out more about improving your credit rating here too.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.