Explaining Credit Searches

Credit searches are something we are all aware of. Financial institutions have done them on us all at some point or other, and we know that when we apply for financial products a check is likely. But just how much do you know about what you involve yourself with, with a search? Or the repercussions of a lender carrying out a check? We decided to take a look, by explaining credit searches in greater detail.

Explaining Credit Searches – What is a credit search?

In layman terms,  a credit search is the action of your credit report being examined by an organisation. One with whom you have made an application for credit. Alternatively, someone such as a prospective landlord could do a check. So it is not exclusively about financial products. Any occasion an organisation accesses your credit file, the credit agency will store it on your file as a search.  Financial organisations carry out searches to see if you have a good history with finance. Lending is based on trust, and they want to be confident you will make full, timeous repayments before handing out cash. A score indicates how you are likely to manage your credit in the future.

The differences between a soft search and a hard/full search

Primarily the difference is how the agency records the search on your credit file. Differently, basically. A soft search leaves much less of an imprint, so it is worth knowing what sort of checks institutions carry out out on your account at all times. Basically, a ‘soft search’ would not be recorded as a credit application search on your credit file. Usually the agency records it instead as an enquiry search. Some also call that a quotation search. Companies do not utilise soft searches to make definitive decisions on lending. It is not a full search, so is not dangerous to your rating.

A hard (or full) credit search, is where you apply for finance. A credit search is run of your credit file. The lender will consider all the elements of your credit file against their criteria. They will then make a decision as to whether to lend to you or not. This is based on what they saw. This search leaves a mark on your file, so you should not wildly apply for finance and hope one application sticks. This gives off an image of desperation.

Explaining Credit Searches – Different types of credit searches

You can break searches down into 3 main types. A credit search, an enquiry search and an audit search. As already noted, a credit search relates to those hard credit searches where an individual makes an application. The lender decides whether to draw up an agreement based on your credit history. Soft searches, as mentioned above come under the criteria of enquiry searches, whilst an audit search relate to all other accesses of your credit file where a footprint marker is recorded on the credit file for reference. Audits are not visible to a lender, only to yourself and the credit reference agency. The most common occurrence of an audit search would be you accessing your own credit report.

What A Search Records

When a search occurs, the date of the search and the name and address of the person being searched will be recorded on the credit file. This is useful to you and one reason why you should regularly check your report. Thus you can see if all searches are ones you expected and are aware of. Regularly checking is a great way to uncover any potential fraud. The main credit search will stay on a credit file held by Crediva, Equifax and TransUnion for two years from the date of the search. The final agency Experian normally only retains their credit searches for one year. 

The Impact On Your Score

It’s important not to worry if you check your file and find that there are a few search entries appearing. Searches on your credit file will not have a negative impact on your credit score or rating. Where it can become a problem is if you have made several applications for credit over a short period of time. Lenders often conclude a number of searches as an urgency for credit and this could concern a lender on the ability to repay the credit amount being applied for. As such 1-2 searches a month is a sensible guide if you’re concerned on over applying and the impact on your credit score.