How does credit check work?

Probably everyone who took out a loan in the UK met with such a date as credit check. We are not economists, so we often wonder what this means. Is there such a thing as loans in the UK without a credit check?

Credit check or credit search is an activity in which various companies check your credit history and activities as well as financial possibilities. Importantly, they don’t always need your permission. However, they must have grounds for doing so. They can’t randomly check who they like. Institutions and companies that will check your credit check include: banks, building societies, utilities (gas, electricity, water, etc.), rental agencies, mobile operators and employers. The latter, however, will not receive a full report about you. In a word, all those with whom you have any contracts related to regular payments can do it.

 

What is credit check?

What is credit check?

As part of credit check, a given business entity, e.g. a bank, will first check whether you have any loans and how large they are. Your credit history will be reviewed thoroughly. Of course, the bank will also find out whether you pay them on time and how you generally manage them. Your financial connections will also be checked. For example, whether you have a joint account, a company, a joint loan with someone.

Credit check is divided into two types: soft credit check (or soft search) and hard credit check (or hard search). How are they different? Well, the first type, or soft, consists in the fact that a given institution or company carries out general research. For example, a broker can determine in this way what are the chances of our loan application being successful. In this case, no thorough analysis is made. This is more a simulation than a real, in-depth check. A very important part of this type of credit check is that it is non-binding. This means that sof credit score can be carried out any number of times. It has absolutely no impact on your credit standing. Therefore, it does not reduce the chances of getting a loan in the future. It’s a good way to know your situation in general. Hard credit check is based on a full scan of your history and creditworthiness. If you submit such an application, the bank will check your credit report. It can be not only a financial institution, but also a mobile operator, for which we want to subscribe. However, any such checks are recorded in your credit history. The next companies or banks where you submit an application will see how many queries you have submitted before. Remember that making your credit check too often in a short time can significantly reduce your credit rating, even for six months.

 

Which credit check should you choose?

Which credit check should you choose?

As you can see, it pays to do a soft credit check. We can then discern our situation and make a hard credit check only if we are sure of success. You are probably wondering why the hard option affects your creditworthiness so badly? Well, many companies may think that you are in financial trouble, since you are constantly applying for a loan or that you base your finances on loans, so you are uncertain. From a bank’s perspective, you are a high-risk borrower. Remember that most hard credit check will remain in your history for twelve months. Some, e.g. debt-related controls, even longer.

 

How to avoid too many hard credit checks?

How to avoid too many hard credit checks?

First of all, make a soft credit check first. Avoid applying for loans that are unlikely to happen. On the Internet you will find suitable websites for this type of simulation. They are often free for example for the first month. If you sign out in time, you will not only pay nothing, you will avoid lowering your creditworthiness. Also, remember to spread your credit check submission over time. If you have subscribed, wait before you get a loan. The key here is not so much the number of hard credit checks, but when they were taken.

 

What affects your credit score?

credit score

Many, often unexpected factors influence the credit check result, i.e. the credit score. First of all, what matters is how much you earn. However, for example with mortgages, it is just as important as you spend. Not only your earnings will be x-rayed, but also the structure of expenses. Even if you eat out, go to the pub, or cook yourself. The bank wants to know not how much it comes to your account, but how much money you have available. Will you be able to pay the installment. That is why all charges, such as loans or credit cards, are also important. They also lower your credit score. Unless they’re small. On the other hand, credit history is important. So it will look bad when you have never borrowed anything. It is best, therefore, if you have already taken loans or you have credit cards, but you never had a problem with the payment. You will then look like a credible person.

However, not only repayment of installments is important. It is equally important if you pay other bills. For example, for telephone, rent, water or gas. Unfortunately, but delays in this regard are also recorded in your credit history. And they have a very negative impact on it. However, not only financial matters are important, but also the degree of rooting in a given place. This is to be a signal that you will not run anywhere and that you tie your future with him. Therefore, for example, it will positively affect your credit score that you live for a long time at a given address, work in one place, and even that you are entered on the list of voters in your district.

 

UK loans for people with low creditworthiness

UK loans for people with low creditworthiness

Therefore, the basic rule for credit check is to measure your intentions. We can always measure our capabilities by doing a soft test. We can do it alone or with the help of a broker. This is useful, especially for larger amounts. Sometimes it is hard to find a thicket of offers and requirements. The broker will help us to make an application that will not be rejected. Thanks to these measures, we will not make a failed hard credit check and we will not miss the chance of a loan. You should also apply as rarely as possible. If necessary, spread out these activities over time. If you have already done the simulation and cannot count on a loan, you can always use a company offering loans for indebted people or for people with low credit scores. You can find more information on our UK loans without credit check.

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