Are Credit Searches Damaging to your Credit File?

Curious about Credit

A credit search, or credit check, is a snapshot of your financial behaviour used by credit providers to indicate “risk” of lending money. There are two different types of credit searches; one that won’t affect your credit rating, and one that could.

‘Hard’ credit searches: When you apply for credit, such as a mortgage or credit card, the lender will run checks to see how likely you are to meet repayments. If you’ve applied for a new job or want to rent a property, an employer or landlord might run a credit search to confirm your identity and see how you manage your money (although not all the info may be visible to employers). These are called ‘hard’ credit checks.

‘Soft’ credit searches: To check your credit as it would appear to potential lenders, you can run a ‘soft’ search. A soft search can also be carried out by third parties to pre-approve you for credit, like a mortgage in principle.

What happens in a credit search?

In a credit search, your financial history is thoroughly checked and scored. Lots of factors are considered, including your level of debt, late payments, CCJs, IVAs and bankruptcies; plus, anyone you’re linked to financially, whether you’re on the electoral register, and more.

You’re given a score for each section and the sum of all the scores is a three-digit number. This is your credit score or rating.

Different credit referencing agencies use different scores, but on a scale of 0 to 999 for example, a good score would be somewhere between 800 and 950, and a fair to average score would be between 700 and 800. At DivideBuy, we use TransUnion as our credit reference agency. You can check your credit score through them for free here.

What effect does a credit search have on my credit file?

Soft credit searches don’t affect your credit file, and you can check your credit as often as you like in this way. Checks will be recorded on the file but are not visible to third parties so it won’t affect the way lenders see you.

A hard credit search alone isn’t likely to have an impact on your credit file overall, it’s only when several hard searches are carried out in a short period of time that your credit score could be affected. Hard credit searches show up on your credit file, and too many in a short timeframe could indicate that you’re trying to open a few new accounts at the same time.

In turn, this kind of activity might suggest that you’re in a bit of hot water financially, perhaps struggling to pay bills or overspending, which equates to risk as far as lenders are concerned. As a result, you might notice a temporary drop in your credit score.

How long do searches stay on my credit file?

Soft searches don’t leave any kind of black mark on your credit file, and although they are recorded, only you can see them.

Hard credit searches are visible to you and third parties, and most stay on your credit report for just over a year. Some hard searches may stay on your credit file for longer; searches by debt collection companies are visible for a couple of years, for example, and any missed payments can show for up to 6 years.

Most hard credit searches won’t affect your credit file after a year, but it’s a good idea to avoid any unnecessary hard checks. At DivideBuy, we offer a soft search function so you can see how likely you are to be accepted for credit before making any formal applications.

A soft search is a free way to find out where you stand financially, highlighting any loans and credit you have as well as your payment history. A soft check can help you figure out whether you need to rebuild your credit file or take other steps to improve your credit rating.

Call us on 0800 085 0885 and one of our friendly representatives will be happy to tell you more!

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