What is a credit check?

What is a credit check?

It’s best to start with your credit file when it comes to understanding credit checks. This is the information the three credit reference agencies — Experian, Equifax, and TransUnion— gather on you. They use this information to compile a credit report about your financial affairs. The online Cambridge Dictionary says a credit check is “an examination of someone's credit history by, for example, a financial organisation that is considering lending them money.” In a nutshell, a credit check provides insight into your financial behaviour in an easy-to-understand report. It lets lenders know if you’ve used credit responsibly in the past, and gives them an idea of how likely you are to repay any money you borrow. Credit checks aren’t just used when you want credit. They can be used by utility companies, for example, to see how likely you are to pay your bills on time. If your credit rating is poor, you might find energy companies provide you with prepayment meters, which means you pay for your energy upfront.

Why might a credit check be needed?

Loans, mortgages, and credit cards

Lenders need an idea of your financial trustworthiness before they lend to you, and your credit rating affects whether they say yes. If you’re eligible, the amount of interest you pay varies, depending on how good your credit rating is. You’re more likely to be given lower interest rates if you have a good credit rating.

Other credit arrangements

Mobile phone contracts, sofas, and cars are some examples where you might have a payment plan set up for a product you haven’t yet paid for in full. Usually, the company needs a satisfactory credit check before you can take your purchase home. They need to be confident you’ll keep up to date with repayments before they hand it over to you.

Landlords and letting agents

Landlords and letting agents often perform credit checks (among other checks) to see if a tenant is suitable to rent a property. For example, if you have a history of missed or late payments, the landlord or letting agent may not feel comfortable renting to you.


Some employers carry out credit checks if, for example, you work in financial services.

What happens when I get a credit check?

When you apply for credit (a loan, mortgage, or credit card, for instance), the lender runs a credit check to see if you’re eligible for their product. They want to get an idea of your financial trustworthiness. Based on your past financial behaviour, you’re given a score. This score varies, depending on which credit reference agency is used to generate it. A high score indicates a good credit rating, which means lenders are more likely to accept your application for any credit. In some cases (such as landlords or letting agents), they’ll be looking if you have a history of late or missed payments, as opposed to your actual score.

What does a credit check show?

Your name and date of birth

It’s important you’re consistent with all lenders, and that you check your name hasn’t been misspelt. The name you use to apply for credit should be the name that appears on your credit report.

Your address and address history

A credit check should show where you currently live and where you’ve previously lived. You should use the address that’s on your credit report when applying for credit. If your credit report shows an address you’ve never lived at, you should dispute it. It could be a sign of identity theft.

Whether you’re on the electoral register

This helps lenders verify your address history.

Your current account overdraft

If you have an overdraft on your current account, it will appear on your credit report, along with the amount the overdraft is for.

Your accounts where you’ve taken out credit

Your credit check will show any accounts where you have taken out credit. This includes credit cards, loans, mortgages, and any credit agreements you have in place, such as anything you’ve bought on finance, or utility debts. It may include any closed credit accounts. It will also include missed or late payments, which stay on your record for at least six years.

Public records

If you’ve had financial difficulties in the past, they could appear on your credit report. For example, if you’ve had a County Court judgement (CCJ) or if you’ve declared bankruptcy. Again, these tend to stay on your credit record for at least six years.

Financial links to others

A credit check shows if you have taken out credit with someone else, like a joint mortgage. If you’re no longer connected with that person, you can contact the lender and ask to be financially disassociated from them. For this to happen, you need to get the other person’s permission and make sure you’ve paid off the debt.

Fraud and identity theft

A credit check reveals if you’ve been convicted of fraud. It also shows if someone has stolen your identity and has committed fraud in your name.

Does a credit check affect my ability to get credit?

Whether a credit check will affect your ability to get credit depends on the type of credit check that’s carried out: either a soft credit check, or a full credit check.

What is a soft credit check?

A soft credit check doesn’t affect your ability to get credit, as it only gives a snapshot of your previous financial behaviour using key pieces of information. A soft credit check can also be called a soft search, a quotation search, a soft inquiry, or a soft pull. What’s good is that while some lenders can see soft searches on your credit file, they aren’t allowed to let this influence their decision. A soft credit check is a useful way to check how likely you are to be accepted for a loan or credit card, for example, before you apply. You can perform as many soft credit checks as you want without affecting your ability get credit. A soft credit check is what TotallyMoney uses to calculate your Borrowing Power in its Free Credit Report — so you can be in the know about your financial health without damaging it in the process.

What is a full credit check?

A full credit check is where a lender looks at your full credit report and all the information within it. A full credit check can also be called a hard search, a hard credit check, a hard inquiry, or a hard pull. A full credit check can affect your ability to get credit. When a full credit check is carried out on you, a footprint of this check is left on your credit report. This footprint usually remains on your report for at least 12 months. Footprints are also visible to lenders, and they’re allowed to let this influence their lending decisions. If you leave multiple full-check footprints in a short period of time, lenders might think you’re desperate for credit and may be less likely to lend to you.

How can I know what lenders see when they do a credit check?

By law, credit reference agencies mustn’t charge more than £2 for you to check your statutory credit file. This is often a one-time deal, and you may have to pay for more if you want to check it again. There are three main credit reference agencies — Experian, Equifax, and TransUnion — many of which offer free trials. However, you must supply your card details, and you will be charged for the service once the trial ends. They’re great for one-off use, but unless you want to pay, you must remember to cancel. If you’re looking to check your credit report for life, try the TotallyMoney Free Credit Report. It’s completely free and has no effect on your credit rating whatsoever.

Credit checks summarised

  • Gives a picture of your financial behaviour
  • Often used by lenders, landlords and letting agents, and some employers
  • Shows name and address, account overdrafts, accounts where you have credit; CCJs and bankruptcies, and financial links to others
  • Can be a soft check, which doesn’t affect your credit rating, or a full check, which leaves a footprint and can make it more difficult to get credit in the future
  • Results influence the rates and offers you’ll be accepted for.