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15 Aug 2019
Jamie Gibbs Jamie Gibbs

Credit scores and checks explained

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Credit report on table showing credit score with spectacles on the side.

Get yourself clued up on credit checks and how they impact on your credit score.

With so many things in life requiring a credit check to some degree, it’s inspired fear and confusion in the hearts of many. But it’s fairly simple to navigate, and we’re here to help make things a little clearer.

What is a credit score? 

A credit score is a number that lenders use to determine how much of a risk you are to lend to. The higher the number, the better, and less risky, a borrower you’re thought to be.

There are three agencies in the UK that provide credit scores – Experian, CallCredit and Equifax. Each of these uses a different system, so you don’t have one credit score – technically, you have three.

Experian’s maximum credit score is 999, CallCredit’s is 710 and Equifax’s is 700.

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Why are the scores different?

Pure and simple, each agency has a different system for working out credit scores, and it uses different numbers to reflect this. So you might find that your Experian score is in the high 900s, but it’s only around 650 with Equifax. This is perfectly normal.

What’s a credit check?

A credit check is what happens when a lender – eg a credit card company or a car finance lender – takes a look at your credit score and history to figure out:

  • Whether you’re a low enough ‘risk’ for them to lend you credit.

  • How much interest they want to charge you.

  • There are a few things that lenders tend to take a look at. Some of the main ones are:

  • How much credit you currently have already eg loans, finance agreements.

  • How good you are at managing that credit – are you behind on your payments?

  • Any financial associations eg a joint bank account with your partner.

There are two types of credit check that these lenders can make – a ‘soft’ and a ‘hard’ credit check.

READ MORE: How to get car finance when you have bad credit

A hard boiled egg next to a soft boiled egg

What’s a soft credit check?

A company might make a soft credit check to get a feel for how good a borrower you are.

The important thing to note is that soft credit checks don’t impact on your credit score in any way. The check itself isn’t made visible to anyone but you. 

This is the kind of check that happens when you compare car finance packages with us. Getting a car finance quote doesn’t affect your credit score in any way.

The same is true when you look at your own credit report – this doesn’t impact your score at all so you can view it as often as you like.

READ MORE: Car finance jargon buster

What’s a hard credit check?

A hard credit check is what happens when you actually apply for a loan, finance agreement or credit card.

These look a little deeper into your credit history to make sure you’re being offered the most appropriate interest rate.

Hard credit checks are noted on your credit report, and too many over a short space of time can have an impact on your credit score.

Most hard credit checks stay on your file for around 12 months.

What happens to my credit score if I want to buy car finance?

If you want to get a car finance package with us, here’s what happens:

  • You get a car finance quote.

  • There’s a soft credit check so we can compare the deals available to you. This check isn’t visible to any lending company and your credit score isn’t affected.

  • You find a finance deal you like and apply for it.

  • The lending company does a hard credit check to give you an accurate interest rate. This is noted on your credit report and stays for about 12 months.

READ MORE: What is APR?

Car on calculator, working out APR

How do I improve my credit score?

Here are some quick tips.

  • Pay all of your bills on time.

  • Get on the electoral register.

  • Make sure your credit report details are accurate.

  • Try and get at least one bill in your name.

READ MORE: How to improve your credit score

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