Credit checks explained
What is a credit check?
The concept of a credit check may loom large when you apply for a loan or seek to rent a flat. Although it’s a process that quietly shapes key decisions in your life, you’re probably wondering: what happens when a credit check is done?
Understanding how it works can help you take control of your financial reputation and navigate the credit system with confidence.
What is checked in a credit check?
A credit check involves an analysis of your financial behaviour to determine how reliable you are with money. When someone reviews your credit, they’ll examine your borrowing history and how promptly you repay your debts.
Credit checks also consider your outstanding debts. Lenders want to ensure you aren’t overextended, so they look at your credit utilisation. This is the percentage you’ve used of your available credit.
Another important aspect is the length of your credit history. A long track record of responsible borrowing often works in your favour. Other factors, such as the type of accounts you hold (credit cards, mortgages, personal loans) and recent applications for new credit, also come into play.
What is a soft credit check?
A soft credit check is a top-level review of your credit profile that doesn’t affect your credit score. It often happens without you even realising it, like when you check your credit report or apply for a pre-approved offer.
What is a hard credit check?
A hard credit check has a more significant impact on your financial profile. It occurs when a lender or financial institution formally reviews your credit history as part of a decision-making process – such as when you apply for a loan, mortgage or credit card.
Hard inquiries signal that you’re actively seeking credit, which can temporarily lower your credit score. If you apply for multiple credit accounts in a short period, lenders may interpret this as a sign of financial instability.
To avoid this, try to space out applications and only request credit when necessary. Being selective about your applications helps protect your score while demonstrating to lenders that you’re responsible when making financial decisions.
How do credit checks work?
Credit checks are carried out through a network of credit bureaus, such as Experian, Equifax, and TransUnion, which collect and store your financial data. When a lender or landlord requests a credit check, they access your report through one of these bureaus.
Your credit report acts as your financial CV, summarising your borrowing history and payment patterns. Lenders use this information to calculate your credit score, a three-digit number that represents your creditworthiness.
This score helps them predict how likely you are to repay a loan on time. Different lenders have different criteria, but a higher score usually makes it easier for you to secure favourable terms such as lower interest rates.
Why are credit checks carried out?
Credit checks help organisations assess risk. This check gives them a window into how you manage your obligations. Lenders want to extend credit to reliable borrowers and avoid risking defaults. Landlords want tenants who won’t miss rent payments, as evictions are costly and disruptive.
Even employers in financial or security-sensitive industries may check your credit to gauge how well you handle personal finances, as it can reflect on your trustworthiness.
What information is needed for a credit check?
To run a credit check, an organisation typically needs your personal details, including your full name, current and past addresses, date of birth, and sometimes your National Insurance number.
In most cases, the organisation performing the check will ask for your consent. For example, when you apply for a loan, you usually agree to a credit check as part of the application process. Soft inquiries, like pre-approved offers, don’t always require consent although those asking for the check need a legitimate reason to do so.
What's the impact of credit checks on credit scores?
Soft checks don’t show up on your report or affect your credit score. Hard checks leave a visible record on your file. Each hard inquiry can shave a few points off your score, but the impact is usually minor or temporary.
Problems arise when multiple hard inquiries occur within a short time. This can signal that you’re desperate for credit, making you seem like a higher-risk borrower. To protect your score, always research eligibility criteria before applying to reduce the chance of rejection.
How do I prepare for a credit check?
Start by requesting a copy of your credit report from all major bureaus. There are several ways you can make free checks of your credit report, so take advantage of them to review your financial data. Check for errors – such as incorrect addresses or payment records that don’t match – and dispute any inaccuracies.
If your score needs improvement, focus on paying your bills on time and reducing your credit utilisation. Keeping your credit card balances below 30% of your limit shows lenders that you manage debt responsibly.
Finally, only apply for credit when you genuinely need it. Plan ahead for major applications, whether it’s a mortgage or a car loan, and space them out to minimise hard inquiries.
Check your eligibility with Evolution Money
We hope this guide has given you a clear understanding of credit checks and how they shape your finances. If you’re considering applying for a secured loan, you can check your eligibility with us today without affecting your credit score.
We’ve helped over 30,000 customers secure funding, and we provide flexible solutions ranging from £5,000 to £100,000, with repayment terms spanning 3 to 20 years.
Want to hear what others think about our service? Take a look at our glowing Feefo customer reviews. For more insights and practical tips on managing your finances, explore our help and advice hub.
We hope this guide has given you a clear understanding of credit checks and how they shape your finances. If you’re considering applying for a secured loan, you can check your eligibility with us today without affecting your credit score.
We’ve helped over 30,000 customers secure funding, and we provide flexible solutions ranging from £5,000 to £100,000, with repayment terms spanning 3 to 20 years.
Want to hear what others think about our service? Take a look at our glowing Feefo customer reviews. For more insights and practical tips on managing your finances, explore our help and advice hub.
Representative 22.93% APRC variable.
For a typical loan of £26,600 over 180 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £484.00. This includes a Product Fee of £2,660.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £87,030.00. Annual Interest Rates range between 11.7% to 46.5% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
