What is a Credit Check? Detailed Guide for Borrowers

What is a credit check, in plain terms? It's when a company looks at your credit report. They check how much credit you have. They also see how you've managed money in the past. Lenders use a credit check to judge if you'll repay borrowed money. 

The check shows your financial history. That covers credit products, account history, missed payments, and court records. UK banks, mobile phone companies, letting agencies, and utility suppliers can all run one. They use it to assess risk. 

The data comes from credit reference agencies. They keep records on most adults. 

Here's how a credit check works in the UK. When you submit a credit application, the company contacts one or more credit reference agencies. There are three main agencies: Experian, Equifax, and TransUnion. 

The agency sends back a copy of your credit report. Lenders complete credit checks against this data. They look at your account history, your debts, and any missed payments. They mix this with the personal and financial information on your form. Then they decide. 

Some checks are visible on your file. That's a hard check. Others stay private. That's a soft check. Each type signals something different to other firms. 

A soft credit check is an initial look at part of your credit report. It does not affect your credit score. It's also called a soft check or quotation search. A soft credit check is invisible to other lenders. Only you can see soft credit searches when you check your record. You can have endless soft checks with no impact on credit eligibility. 

Companies use soft checks for credit card eligibility tools. They use them for insurance or credit quotations and a mortgage agreement in principle. Price comparison websites also use them. A soft credit check is the safest way to test your chances before you apply for credit. 

A hard credit check is a complete search of your full credit report. It happens when you formally apply for credit. That includes a loan, credit card, mortgage, overdraft, car finance, or some mobile phone contracts. 

A hard credit search involves the lender reviewing your full borrowing record. They check any account history lenders hold on you. Each hard credit check is recorded on your file. It stays visible to other firms for around 12 months. 

A single hard search might only have a small, short-term effect on your credit score. But several hard credit searches in a short period can flag you as higher-risk. 

The main difference between a soft credit check and a hard credit check is visibility and how much each one can impact your credit score. One stays private. The other shows up on your file. 

Here's a quick side-by-side comparison: 

Several types of organisations carry out credit checks in the UK. It's not just banks. Firms complete credit checks before offering credit on any major product. Other service providers run them too as part of complete background checks. 

Common companies that may run a credit check on you: 

• Banks, building societies, and credit firms: For loans, credit cards, mortgages, and overdrafts 

• Mobile phone companies: For a mobile phone contract 

• Utility companies: For utility supply (gas, electric, water) 

• Letting agencies and landlords: When you apply as a potential tenant for a rental property 

• Insurance providers: To provide insurance quotes 

• Price comparison websites: For credit card eligibility tools 

A credit check pulls together your financial information from the past six years. Here's what typically shows up on your credit report: 

• Personal details: Name, date of birth, current and past addresses, electoral register status 

• Credit products: Credit cards, mortgages, overdrafts, and any closed accounts 

• Account history lenders hold: How well you've managed each account, including missed or late payments 

• Court records: County court judgements, IVAs, and bankruptcies 

• Financial links: Anyone you share a joint bank account or mortgage with 

• Employment status: Sometimes captured during your credit application 

• Credit searches: Both soft and hard credit checks recorded, with hard ones visible on your file 

Yes, credit checks affect your credit score but only the hard ones. Soft credit checks have zero impact on your credit score. It doesn't matter how many you run. A single hard credit check usually drops your credit score briefly. The change is minor. It typically recovers within a few months if you keep managing accounts responsibly. 

Several hard credit searches in a short space of time can impact your credit score more. Lots of applications signal financial difficulties to lenders and other service providers, potentially influencing future decisions. Space out applications. Use soft search eligibility tools first. This helps your credit eligibility long term. 

At Monixa, we use a soft credit check at the start of your application. Applying with us won't affect your credit score. The search stays between you and Monixa. 

Our soft credit check helps us see if you qualify for credit between £200 and £1,500. We consider people with bad credit and offer bad credit loans. We look at your full picture, not just a number. Borrowing money should be simple, even for low risk applicants rebuilding their credit ways. 

If you accept the offer, we will update your credit file to show you’ve borrowed from us (this is sometimes called a hard check). This is required by FCA rules. Approved? Cash is sent to your bank within 90 seconds. Repaid over 4-6 monthly instalments. No hidden fees, no early repayment fees.