Whenever you apply for anything, may that be a credit card or a car loan – a credit check will always be conducted against your name. This means the lender will look into your credit report to see if you’re eligible.
For context, there are two different types of credit checks, one being a hard check and the other being soft. There are some pretty important factors that set them apart, so it pays off to know the difference.
Below, we’re going to look at what a soft credit check is, how it differs from a hard credit check, and what benefits a soft enquiry can bring. Let’s start by looking at what a soft credit check is.
Even though major credit applications will require a peek at your credit report, not every check will leave a digital footprint. A soft credit check can be initiated by yourself or an external company, and sometimes can even happen without your knowledge.
A soft credit check doesn’t even have to be an application for credit, most notably soft credit checks are used for preapproval or background checks. This can range anywhere from quotations for car insurance, to checking your credit score.
Usually, there are two reasons for a soft credit check, promotional and informational.
Promotional – This is when companies are seeing if you’re eligible for their services and at what rates etc. before they contact you, for example, when you’re checking car insurance quotes or a credit card company prequalifying you for credit.
Informational – An example of an informational check would be if you decided to check your credit score in aid of improving your credit score. Alternatively, others can do this without your consent, e.g. an employer as part of a background check or a landlord.
The main thing to take away from a soft credit check is that it doesn’t impact your credit score, unlike a hard credit check. But what other differences are there?
There is another type of credit check that can occur during a credit check, it’s known as a ‘hard credit check’ or ‘hard enquiry’. These types of enquiries generally occur during applications for credit, such as a new loan, credit card, mortgage etc. and unlike soft credit checks do impact your credit score.
Hard enquiries make up 10% of your credit score and can be the difference between attaining a good or bad credit score. This is because if too many hard enquiries are made too close together it can appear as you being overly reliant on credit, and therefore suggests you are most likely unable to make repayments.
Of course, this isn’t always the case, but this is it how it appears to lenders.
The reason why a hard credit check will affect your credit score while a soft enquiry will not, is that hard enquiries are more prevalent in showing your credit history and behaviour. While soft credit checks are used to preapprove or make small checks, hard checks are to show applications for new credit.
The more applications made within a small space of time can lead lenders to believe that you are less likely of paying your existing debts.
Even though for the most part hard and soft credit checks are both in principle credit checks, they are drastically different in their intent and the implications as a result of.
Here are the main differences between hard and soft credit checks:
Not only do soft credit checks not affect your credit score, but they’re also not even visible to external lenders. This makes soft credit checks are a useful tool in aiding your credit journey, all the more reason to check your credit score report.
A credit score report is generated by a credit reference agency on behalf of the credit bureau to display your credit history and score.
This will provide helpful information to utilise when working to build your credit score, offering areas you’re doing well and oppositely, areas you’re lacking in.
There are many ways to improve your credit score, applying for the electoral vote and reducing your debt can be great ways to get started. If you’re serious about increasing your credit score quickly (well as quickly as is possible), it takes the dedicated time, effort and most importantly, consistency.
One way to improve your credit score reliably is to acquire new credit and make repayments on time and in full. Of course, this isn’t always possible for those with bad credit – as new credit is hard to come by and/or comes with higher rates.
But, there are still options out there.
If you’re left frustrated, unable to get accepted for new credit – look no further. Wheels4Sure offer affordable car leasing for those with bad credit, providing a second chance to get back on the road and rebuilding your credit.
With a 95% acceptance rate and a whole list of brand new cars to choose from, you can wipe those worries away and drive away with your next car – stress-free.
Fill out our enquiry form or call us on 0203 823 1010 to find out more information.