What is involved in credit checks?

What is involved in credit checks?

A credit check can have more of an impact than you think, so it’s important to understand how they work and what they can affect. In this guide, we will take a closer look at what is involved in a credit check.

What is a credit check?

A credit check, or credit search, is a check on your financial behaviour. When you apply for credit, your financial situation and history will be taken under consideration via these checks by banks and lenders. This is to see how ‘trustworthy’ you are when it comes to money.

What is a credit check?

A credit check, or credit search, is a check on your financial behaviour. When you apply for credit, your financial situation and history will be taken under consideration via these checks by banks and lenders. This is to see how ‘trustworthy’ you are when it comes to money.

Why do places do credit checks?

Lenders, or anyone else who feels a credit check is necessary, such as landlords and even some employers, will conduct a search to verify your risk levels when it comes to your finances. For example, if you applied for a credit card, the credit card company will want to know what the chances are of you paying back the money based on your repayment history. Therefore, it’s important to have a clean record if you want to borrow money in the future.

What happens with a credit check?

When you apply for credit, whether that’s a loan or a credit card, the lender will run a credit check on you. They will often use one of the three main credit reference agencies, Experian, Equifax, or TransUnion. These agencies will gather information about you to produce your credit report and score.

What will a check show?

A credit check will show many things, but it predominantly shows your borrowing health. This means it will provide lenders with a view of how well you will be able to pay back a loan by showing your financial history and behaviours.

Along with this, it can provide you with information about your credit score to help you work out how to improve it. For example, it will highlight the reasons why your score may have changed and whether it’s gone up or down. This can provide an insight into why an application may have been turned down.

It can also show your personal details, such as your name, date of birth, address history, whether you’re on the electoral register, and your public records. This way, you can spot if there are any errors within your details on the report which could affect your score. Lastly, it can show who has been checking your report. This is because every time a check is done, it will leave an inquiry on your report.

What are the differences between hard and soft credit checks?

Soft and hard credit checks essentially do the same thing. They check your credit history to indicate your reliability. However, the main difference is that one can affect your credit score and the other does not.

Soft credit check

A soft credit check will check your rating when you’re not actually applying for credit. This type of check is just an overview of your report and is often done when you want to see your rating yourself or if a company wants to use it as part of an identity check. Whenever a soft check is done, it does not appear on your credit report, which means it will not affect your score.

Hard credit check

A hard check is more thorough and is done when you are applying for credit. Therefore, it is usually requested by banks and lenders. This type of check will linger on your record which can slightly lower your score temporarily. This is why it is advised not to apply for credit on multiple occasions around the same time as it will show on your record and worsen your score.

Who will do credit checks?

There are many companies or organisations that will request a credit check. The main ones being banks and lenders, such as credit card companies. However, other companies that aren’t as obvious include:

  • Your employer, particularly if you work in the finance sector
  • Utility companies
  • Landlord

Do thinkmoney do credit checks?

Here at thinkmoney, you don’t need to worry about your credit score because we don’t do credit checks. Whether you’ve got bad credit, a County Court Judgement (CCJ), or no credit history at all, we believe everyone deserves a current account. The only checks we do are to verify your identity.

Our aim is to help you to take back control of our finances so you improve your credit score!