What Is A Hard Credit Check? How Does It Affect Your Credit?
When you apply for something that requires a loan, such as a mortgage, car, credit card, or even a mobile phone contract, the company will likely perform what’s called a hard credit check before approving your application. This allows them to view your entire credit history report, including late payments, bankruptcies, the amount owed across accounts and other risk factors.
Hard checks are different from soft credit checks that only show your name, address and perhaps income details – not everything in your file. Hard inquiries do temporarily impact your overall credit score for 12 months or so. That’s why running up too many in a short time can hurt your approval odds.
You want to limit hard inquiries whenever possible but also accept that occasional ones are necessary for accessing credit needed to build assets and your adult life.
What is Hard Credit Checks
When you apply for a credit card or loan, the company needs to check if you’re able to pay back the money. They’ll do a “hard credit check” to review your full financial history:
- Check your credit score and report details
- Done by lenders when submitting applications
- Scores may temporarily drop a few points
This dip is normal. In the UK last year, people had around 2 hard credit checks on average from applying for new credit. As long as you’re only applying when you have a real need and plan to use the card or loan responsibly, a small drop is OK.
Too many checks in a short time can seem risky, though. You make sure to shop around and only formally apply to 1-2 lenders for the best rates that match your needs. You can avoid submitting many random applications close together without a plan.
Comparison with Soft Credit Checks
Hard credit checks leave more of a “footprint” than soft checks.
Soft checks:
- Don’t impact your score
- Just show you basic public data
- Used for pre-approved credit offers
You may do a soft check yourself just to view your credit score. It’s invisible to lenders.
Hard checks give full access to your private financial history and show up in your report. If you apply for too many new loans or credit cards too fast, some lenders may get suspicious and reject your applications.
Last year, UK consumers had 4.8 soft credit checks on average but only 1.78 hard loan/card application checks, which temporarily lowered scores.
If you need loans for bad credit and no credit check due to financial struggles, be cautious of lenders making big promises without checking your history at all. Make sure to verify the license and rates.
Impact on Credit Score
Applying for new loans or credit cards requires lenders to do a “hard pull” on your full credit file. This typically temporarily drops your credit score by a few points.
The harder you shop around and apply for credit, the more checks pile up, which can seem risky. However, the effect is usually minor if you use credit properly after approval.
In the UK:
- Hard credit checks impact your score for about 12 months before dropping off your credit history
- On average, a hard credit check causes a 5 to 10-point credit score dip
- Too many checks in a short period lead to bigger declines and loan and card applications 6+ months apart.
- But responsible use of that new credit for a year helps rebuild scores
Let’s say you apply for a new £5,000 loan. Even if that causes a 10-point drop initially, paying on time builds your credit history.
| How Hard Credit Checks Affect Credit Scores | |
| Impact Type | Description |
| Short-Term Score Drop | Each hard inquiry can reduce your credit score by 5-10 points |
| Cumulative Effect | Multiple hard checks in a short period can signal a higher risk |
| Duration of Impact | Remains on the credit report for up to 2 years |
| Recovered Over Time | Score typically recovers after a few months of responsible credit behaviour |
After a year, your score would recover and possibly increase. The main impact is short-term. One or two careful hard checks paired with responsible credit use won’t permanently hurt you.
How Often Can You Apply Before Issues?
If you apply for financing like loans and new credit cards too often, some lenders will get wary even if your score is decent. Multiple hard checks in a few months may signal risk or overspending in their view.
- Mortgages, auto loans and student loans require hard checks but often “group” together as one inquiry. This reduces impact.
- The average number of hard checks last year was less than 2 per adult from loan/card apps. Around 6 months between applications is safer if possible.
- Under 3 hard checks per year spaced apart rarely causes issues if you then use any new credit responsibly after approval.
- But 5+ checks in 6 months or less can negatively impact your odds of approval.
If you have pressing financial needs requiring multiple loan applications in a short time, consider searching for instalment loans near me that allow bad credit or no credit check. You can compare interest rates and repayment terms closely in those cases to avoid very high APR traps.
The impact also depends on your starting score and income level. You space loan/card applications out wisely, especially if your credit history is limited or troubled. Checking your actual credit score first helps make informed application decisions, too.
| How to Minimise the Impact of Hard Credit Checks | |
| Tip | Description |
| Rate-Shopping Strategy | Multiple inquiries for the same type of loan (e.g., mortgage) within 14-45 days count as one inquiry |
| Limit Unnecessary Applications | Only apply for credit when you genuinely need it |
| Monitor Your Credit Regularly | Use free credit score monitoring tools to stay aware of changes |
| Opt for Pre-Qualification Offers | Pre-qualification checks are soft inquiries and don’t impact your score |
When Hard Checks Are Necessary
Certain loans or credit products require lenders to check your full credit file and score history via a hard inquiry. This includes:
- Mortgages
- Auto loans
- Credit cards
- Personal instalment loans
You can’t avoid them during those major financial activities like buying a home or car or using credit cards responsibly to build your credit.
In the UK last year:
- There were 2.7 million mortgage approvals needing hard checks
- Over 3 million new credit card approvals investigated applicants further, too
If you’re shopping rates on a big purchase like a mortgage, try to finish comparing different lender rates within a 1-2-month span. This condenses hard checks into one batch rather than dragging out hit after hit on your score all year long. Planning timing wisely prevents unnecessary damage.
Hard checks are a necessary evil, and some types of essential borrowing are needed in life. Monitoring your credit score and planning applications around big financial decisions lets you tread safely.
Conclusion
Being informed on how different credit checks work is vital to maintaining a healthy credit score over time. This lets you strategically time loan and credit card applications around major purchases to minimise any dings. Monitoring your score every 4-6 months also helps you make informed borrowing choices that align with your budget and needs.
A few hits won’t ruin your finances if the rest of your history demonstrates consistency. Stay educated, and you’ll handle credit wisely for years to come.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.
