Why do we ask you to do a soft credit check?

Your credit file matters. Regularly checking it and doing all you can to improve your credit score is a good way to be accepted for more attractive credit options. 

What is a credit report?

A credit report is a document that logs your history of managing and repaying debts and credit. Lenders use it to help them decide whether potential customers are good or bad risks. 

Anyone who’s taken out some form of credit will have a credit report, which individuals and others can access by running a credit check. Three credit reference agencies generate these reports:

• Equifax

• Experian

• TransUnion

Third-party companies such as ClearScore and Credit Karma, also offer access to your credit reference agency reports for free.

The credit agencies also offer a free 30-day trial for more comprehensive credit reports and services, but you’ll be charged a monthly fee after that if you don’t cancel. 

What are the two types of credit checks?

There are two types of credit checks: 

Hard credit checks 

Companies run hard credit checks to determine the risk they’d be taking by giving a potential customer credit. These checks are typically conducted when you apply for some form of credit, such as a loan or a mortgage. However, they’re also carried out by mobile phone companies, utility providers and others with a legitimate interest in your track record of making repayments. 

It’s worth noting that hard credit checks remain on your credit report for a year, after which they disappear. Too many checks on your file within this period can harm your chances of future successful applications. 

This is because the lender will interpret your repeated attempts to get credit as a sign that you’re struggling with money management and debt. For this reason, it’s best to avoid making several loan or credit applications over any 12-month period.

Soft credit checks

You can run soft credit checks to help find financial products for which you have a strong chance of being accepted. 

Running a soft search can also help you identify areas you could work on to improve your credit score. This is important as the higher your credit score, the greater your chances of making successful applications with more attractive interest rates in the future. 

What does a soft credit check show?

Running a soft credit check will give you an overview of your financial history. It shows:

• Your credit score 

• Your name, postal address and date of birth

• Whether you’re registered to vote

• Details of current or closed bank accounts

• Details of your credit card accounts and debts

• Details of loans and other credit products you have

• Any late or missed payments

• Public records of any CCJs, individual voluntary agreements (IVAs) or bankruptcies

• Joint accounts currently or previously held, as well as any other financial products that are shared with another person 

What can others see by running a soft credit check? 

Some financial providers and brokers, such as comparison sites, use soft checks to see whether you’d likely qualify for individual products. These eligibility checks, which are often run as part of generating a quote, are based on your credit score and on details you provide. If you apply for a product following a positive eligibility check, the outcome should be successful, and the soft check doesn’t do any damage to your credit score. 

Why you should do a soft credit check?

Running a soft search offers more than just a way to get a clearer picture of what products you’re likely to be approved for. Running regular soft credit checks could also benefit you in the following ways:

1. Protect and boost your credit score

Your credit score can be affected if you’re financial history is sketchy. In this case, it’s important to look for ways to provide a clearer insight into your credit management, perhaps by getting a credit card. Even if you don’t need the card, and only use it for small purchases, it’s a good way to build up a record of managing credit. 

If you have a fist full of credit cards, don’t just keep the ones you no longer use. Lenders prefer active rather than dormant credit cards. There are two reasons for this. First, you might be tempted to use them when you’ve maxed out the others. Second, there’s a risk of fraudulent use. If you don’t need or want a particular credit card, close it. 

Also, take care to update your report if it shows you are still financially linked to someone when such ties no longer exist. Otherwise, the poor rating of someone you once shared a joint bank account or mortgage with could drag down your credit score. 

2. Spot identity theft

A soft check will reveal financial products opened in your name. This could include a fraudster taking out a loan using your identity. If this happens, you should report the crime to the lender, the credit reference agency and the police via Action Fraud.  

3. Pick up errors 

Mistakes can happen, but they should be corrected. If you spot anything amiss with your credit file, such as a mystery County Court Judgment (CCJ), contact the relevant credit reference agency. Remember to check the other two agencies as well, just in case they also have the same error. 

Do soft searches affect your credit score?

You can run as many soft credit checks as you want because they won’t affect your credit score. This is because these checks are hidden from third parties. 

The only way companies can see your financial history is to pay for a hard credit check, which they must have a legitimate reason to request. Providing you’ve applied for a suitable product based on a soft credit check, a hard credit check shouldn’t be a worry. You can expect your application to succeed and for there to be no negative impact on your credit score.

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