If you’ve ever applied for a loan, mortgage or even a mobile phone contract, you’ve probably heard the term credit check. Lenders use these checks to decide whether to approve you for credit – but not all credit checks work the same way.
There are two types: soft credit checks and hard credit checks. Understanding the difference can help you protect your credit score and make wiser financial moves. Let’s dive in.
What’s a soft credit check?
A soft credit check looks at your credit report without affecting your credit score. These checks are typically used for things like:
- Pre-approval offers for loans or credit cards.
- Background checks by landlords or employers.
- Checking your own credit score.
Soft checks aren’t visible to lenders, so they won’t impact any future applications. They simply give a snapshot of your credit history without leaving a mark.
What’s a hard credit check?
A hard credit check happens when a lender or financial provider reviews your credit report to make a decision. This usually happens when you:
- Apply for a credit card, loan, or mortgage.
- Request a credit limit increase.
- Sign up for a mobile phone contract or car finance
Hard checks are recorded on your credit report and can slightly lower your credit score, especially if you have several in a short space of time. The impact is usually small and temporary, but it’s worth being mindful of if you’re planning to apply for credit.
What are the key differences between soft and hard credit checks?
Here’s a quick comparison to help you understand the differences:
| Soft credit check | Hard credit check | |
| Impact on credit score | No impact | Can lower your score slightly |
| Visible to lenders | No | Yes |
| When it happens | Pre-approvals, background checks | Loan or credit card applications |
| How often? | Unlimited | Best to apply selectively |
How to minimise hard credit checks
Hard credit checks aren’t a bad thing, but too many in a short time can impact your score. Here’s how to keep your credit health in check:
- Apply selectively. Only apply for credit when you need it. Research lenders first to check if you’re eligible before applying.
- Space out applications. If you need to apply for multiple financial products, try to spread them out to avoid a big dip in your score.
- Consider using Zilch to build your credit score. Zilch lets you build credit responsibly by using your Zilch card to Pay over 6 weeks or 3 months – without multiple hard credit checks.
The bottom line
Understanding the difference between soft and hard credit checks helps you protect your credit score and make savvy financial decisions.
Soft checks won’t affect your score, while hard checks can – so it’s important to apply for credit carefully. By applying selectively and using tools like Zilch, you can take control of your credit journey and keep your score in great shape. Sweet.