What is a credit check?

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What is a credit check?

A credit check, which is called a credit search is performed when a company examines data from your credit report to get a picture of your financial conduct, although a company does not need your consent to examine your credit report they do need to have a good reason to do so, normally done for example when you are applying for a loan with them or taking out a mobile phone contract

The sort of companies which you can expect to perform a credit check on you can include the following:

  • Utilities suppliers (e.g. gas, water and electricity)
  • Building Societies
  • Banks
  • Direct Lenders
  • Letting agencies
  • Landlords
  • Mobile phone companies
  • Some Employers (normally they won’t see a full report)

When a company performs a credit check they are looking to see if you have paid back and loans on time, how much credit you have out and it you are keeping up the repayments, they are checking to see that you are managing the credit that you already have and are able to manage any additional credit.

They will also look to see if you can any join arrangements such as a shared bank account or a shared mortgage (Call Financial Association) and take a look at their credit history too.

By the way yu can check your own credit report as many times as you like, and it will not have any bearing on the score and therefore will not have any bearing on your likelihood of any loan applications being accepted.

What is a soft credit check?

There are two types of credit checks a soft credit check and a hard credit check. We will start with explaining the soft credit check which is when a company will look at some salient points about your credit report to determine if you would be likely to be accepted for credit. An analogy  basically they are feeling for a pulse before going in for full surgery which may damage your health, so a soft credit check is a quick peek at you financial behaviour to decide how likely it would be that your application for credit would be without have to perform a hard credit check.

Like feeling for a pulse will not leave any visible marks neither will a soft credit check, unlike surgery which will, any hard credit check will leave a foot print which will be visible to other companies that a credit check has been performed, and like have your pulse felt only you will know how many times it’s been searched for, so only you will know how many times a soft credit check has been performed.

When you apply for a payday loan or short term loan via Cashute a soft search will be performed on your credit report.

What is a hard credit check?

When you accept an offer for a short term loan the direct lender will perform a full hard credit check on your credit report, each of these searches is recorded on your credit report and can affect your credit score for six months, so any company with which you apply for credit will see that you have applied for credit in the past.

If you have too many hard credit checks over a short space of time your credit score can reduce which will make it harder to be approved for a loan.

Please remember that it is not only direct lenders who may perform a hard credit check on your credit report, it can also be utility companies, mobile phone providers,

To help improve your credit score or at least not reduce it further you want to reduce the number of hard credit checks that are performed on your credit report this is one of the reasons we recommend going via a broker when looking for a short term loan like Cashute.

Difference between soft and hard credit checks? (JT)

Very simple, soft credit checks are not recorded on your credit report as having been done to anyone but you, so a soft credit check is not visible to a company performing either a soft credit check or a hard credit check and soft credit checks do not affect your credit score.

Hard credit checks are visible to all companies performing hard credit checks and many also reduce your credit score.

When a soft credit check can occur

  • You decide to examine your own credit report
  • A company wanting to perform an identity check
  • You apply for a loan via Cashute and our partner performs a soft credit check to determine if you would qualify for a short term loan

When a hard credit check can occur

  • When you apply for mobile phone contract
  • When you apply for a loan,
  • When you apply for a credit card
  • When you apply for a mortgage
  • You apply to a utility company

Soft credit checks are very handy.

Since a soft credit check is not visible to anyone but you they are handy when trying to determine how likely you would be in being accepted for a short term loan, credit card or any other type of credit. You can run soft credit checks on your credit report until the cows come home and it would have any impact on your credit score, this is how we can determine if can match your application for a payday loan without touching your credit score.

How will a Hard credit check affect my credit score? (JT)

This is a very good question, why would just looking at a credit report have a negative effect on your credit score, well the simple answer is that too many hard credit checks would appear to a company that you are in a financial pickle and would regard you as potentially a higher risk as you may be trying to borrow too much or rely too much on borrowing, this does not mean that you will refused a short term loan with bad credit since Cashute panel of direct lenders have experience of providing payday loans with bad credit.

Hard searches it is important to keep in mind will remain on your credit report for up to 12 months and some can be on there for much longer, so to take care of your credit score you do not want to be applying for credit too many times with too many lenders hence why going through an intermediary like Cashute is often a better option.

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How can I avoid hard credit checks?

The quick answer is not to make too many applications for credit which you might be declined for but you if you only make applications for credit which are sure you will be accepted, to reduce the number of hard credit checks on your credit report is to apply for credit via a broker or intermediary like Cashute as your credit score will not be affected unless you apply for the payday loan when the direct lender makes you an offer for a short term loan

How can you reduce the effect of hard credit checks?

Basically, don’t apply for any credit of any sort, which of course is not possible in todays world, what with mobile phone contract, utilities providers, credit card companies, the list goes on. To keep your credit report looking good and healthy minimise your applications for credit to around one every three to four months, although our direct lenders have experience in lending to people with bad credit scores.

If you want to read more about how to improve your credit score and get nice and healthy click on the link

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