Your credit score influences everything from car finance rates to mortgage offers, so keeping it in good shape matters. If you’re planning a big-ticket purchase, like a city-friendly hatchback for the daily commute or an SUV for long weekends in Snowdonia, understanding how lenders assess your credit history helps you avoid surprises.

At My Car Credit, we use soft credit checks at the start of the finance process, meaning you can check your eligibility without affecting your score. Knowing how soft and hard checks work gives you the freedom to shop for finance options with confidence, without worrying about unnecessary dings to your credit report.

So, how do credit checks affect your score? In this guide, we’ll break down what credit checks are, how they affect your score, and how to minimise their impact, so you can make informed financial decisions without the guesswork.

What is a credit check?

A credit check provides lenders with details on your borrowing habits, repayment records and financial reliability. Car finance companies aren’t the only ones who rely on credit checks to vet applicants. Banks, mortgage providers and other lenders also use credit checks to screen applicants and decide who qualifies for credit and what terms they receive.

Credit scores reflect financial behaviour, with higher scores increasing the chances of favourable rates and flexible repayment options. Patchy records make lenders more cautious, resulting in higher interest rates or smaller credit limits.

Risk vs reward 

At the end of the day, it’s all about risk. Lenders don’t run credit checks just for the sake of it. It all comes down to risk. When you apply for finance, whether it’s a car loan, mortgage or credit card, the lender needs to assess how likely you are to repay what you borrow. Your credit score acts as a risk indicator and shows lenders whether you have a history of managing money responsibly or if you might be a higher-risk borrower. 

• Someone with a long track record of paying bills on time and keeping debts under control is seen as low risk, which often leads to better interest rates and borrowing terms. 
• On the other hand, if a lender sees missed payments, frequent applications, or large outstanding debts, they may decide you’re a higher-risk borrower, which could result in higher interest rates, lower credit limits, or even a declined application.

But how do credit checks affect your credit score? That depends on the type of check being performed. A soft check won’t leave a mark, but a hard check can temporarily reduce your score, especially if multiple applications are made in a short period. This is why lenders use both types of credit checks to build a full picture of your financial behaviour before making a decision.

It might feel frustrating at times but it’s ultimately about making responsible lending decisions. The goal? To make sure you don’t end up borrowing more than you can realistically afford.

How do they source the information? 

When you apply for finance, lenders don’t just take your word for it. They turn to credit reference agencies (CRAs) for a full picture of your financial history. These agencies hold detailed records about your borrowing behaviour, which lenders use to assess how reliable you are as a borrower. 

In the UK, the main three are:

• Experian
• Equifax
• TransUnion

What information do CRAs have access to?

Credit reference agencies pull data from multiple sources to create a credit report. This includes:

• Your credit accounts – Loans, mortgages, credit cards, store cards, overdrafts and even some utility bills.
• Your repayment history – Whether you’ve made payments on time, missed any or defaulted on a loan.
• Your total outstanding debt – How much you owe across different credit products.
• Credit applications – Any past applications for credit, including hard credit checks.
• Electoral roll information – If you’re registered to vote at your current address, which helps verify your identity.
• County court judgements (CCJs), bankruptcies and IVAs – Basically, any legal action related to unpaid debts.
• Financial associations – If you have a joint account or a financial connection with someone else, their credit behaviour could affect yours.

What is a good credit score? Understanding the differences between CRAs

Credit scores aren’t one-size-fits-all. Since the UK has three major CRAs (Experian, Equifax and TransUnion) you don’t have just one credit score, but three different ones. Each CRA uses its own scoring system, meaning what number counts as a “good” score with one agency might be “fair” with another.

Credit score ranges by CRA

Each CRA scores differently because they pull slightly different data and weigh factors differently.

For example:

• Experian’s top score is 999, while Equifax goes up to 1000 and TransUnion stops at 710.
• A “good” Experian score starts at 881, but with Equifax, you’d need at least 671.
• A score of 650 might be “poor” with Experian but “fair” with Equifax.

This means that scores aren’t standalone. To be properly interpreted it needs to be clear what CRA they’re issued by. 

Is it all legal? Is my privacy being invaded?

It’s natural to wonder if all this information sharing is legal or a breach of privacy. The good news is that CRAs operate under strict UK data protection laws, including the Data Protection Act 2018 and the UK General Data Protection Regulation (UK GDPR).

Here’s what you need to know:

• You must give consent – When you apply for credit, you agree to a lender checking your file.
• You have a right to access your report – You can request a copy of your credit file from any of the CRAs for free.
• Lenders can’t see everything – Personal details like your salary, bank account transactions or savings balance aren’t shared with CRAs.

Credit reference agencies hold a lot of financial data, but they don’t make lending decisions. They simply provide the information that lenders use to assess risk. That’s why different lenders may offer different terms, even if they’re looking at the same credit file.

If anything on your report looks incorrect or unfair, you have the right to challenge it and request a correction. Keeping an eye on your credit file ensures that everything lenders see is accurate and up to date.

Soft vs hard checks

Credit checks fall into two categories – soft checks and hard checks. Understanding the difference helps borrowers avoid unnecessary dips in their score. More information on whether credit checks affect your credit score below!

What is a soft credit check?

A soft credit check is a preliminary review of your credit file without leaving a visible mark on your credit report. Lenders use them to assess eligibility before a full application.

When are soft checks used?

• Comparing car finance options (like with My Car Credit)
• Checking eligibility for loans, credit cards or insurance
• Landlord or employer background checks
• Pre-approved credit offers

What does a soft credit check show?

Soft checks provide a basic overview of financial behaviour, including:

• Existing credit accounts like loans, credit cards and mortgages.
• Repayment history – A record of on-time or missed payments.
• Creditworthiness – A broad assessment of financial reliability to determine eligibility for specific financial products.

Impact on credit score

Do soft credit checks affect your credit score? Soft checks do not reduce credit scores, and they aren’t visible to other lenders. Only the person checking their own report can see them. This means that researching finance options or checking eligibility through a service like My Car Credit (which kickstarts the application process with a soft search) leaves no trace.

In a nutshell: Since soft checks aren’t linked to an actual credit application, they don’t signal to lenders that you’re actively seeking new credit. That means you can shop around for a good deal without worrying about your score dropping.

What is a hard credit check?

Hard credit checks go deeper into financial history and leave a permanent mark on your credit file. Lenders use them when deciding whether to approve a formal credit application. 

When are hard checks used?

• Car finance or hire purchase agreements
• Mortgage or personal loan applications
• Credit card approvals
• Setting up a mobile phone contract or utilities

What does a hard credit check show?

A full credit check provides lenders with:

• All open credit accounts and outstanding balances
• A full repayment history, including any late or missed payments
• Previous credit applications
• Any county court judgements (CCJs) or bankruptcies

Impact on credit score

How do credit checks affect your credit score? Each hard credit check can cause a small dip in a credit score, typically between 5-10 points. One or two hard checks spread out won’t cause much trouble, but frequent applications in a short space of time suggest financial difficulty and can make lenders wary.

How much does a hard credit check lower your score?

• Each hard check can reduce your score by 5–10 points.
• The effect fades over time, usually within a few months.
• Too many checks within a short period can lead to bigger drops.

In a nutshell: If you’ve applied for one credit card and a car loan over six months, this won’t raise concerns. If you’ve applied for five loans, two credit cards and a mobile phone contract in a single month, lenders may assume you’re struggling financially.

How do soft and hard credit checks differ?

The final verdict? Soft checks work best for shopping around, while hard checks confirm final finance agreements. Make sure you check what type of credit check will be carried out before you send off an application. 

Why do lenders perform credit checks?

Lenders check credit histories to:

• Assess creditworthiness – Scores are used to determine how reliable a borrower is.
• Review repayment history – Ensure a track record of managing debt well.
• Verify financial stability – Confirm that repayments can be met and make sure applicants don’t bite off more than they can chew. 
• Decide loan terms – Results are used to set interest rates and repayment amounts.

A strong credit score often leads to lower interest rates and better borrowing terms, just as a clean driving record reduces insurance premiums.

How does a credit check affect your credit score?

Do credit checks affect your credit score? The impact of a credit check depends on whether it’s a soft or hard check. Some checks are harmless. Others can cause a temporary dip in your score, especially if too many appear in a short space of time.

How to reduce the impact of hard credit checks

Hard credit checks are sometimes unavoidable, like when applying for car finance, a mortgage or a loan. Lenders need a full picture of your financial history but that doesn’t mean they have to drag your score down unnecessarily. With the right approach, you can minimise their impact and keep your credit profile in good shape. Here’s how:

• Space out applications – Avoid making multiple credit applications in a short period.
• Use soft checks first – Services like My Car Credit’s eligibility check provide finance options without affecting credit scores.
• Apply for credit only when needed – Reduce unnecessary applications to keep your score healthy.
• Check credit reports regularly – Identify and fix any errors that might be holding your score back.
• Plan major purchases – If you’re applying for a mortgage or car loan, avoid smaller credit applications beforehand.

Managing credit applications wisely helps maintain a strong score while still securing the right finance deal.

Frequently asked questions

Do soft credit checks affect your credit score?

No. Soft checks aren’t visible to lenders and don’t lower credit scores.

How many hard credit checks are too many?

Lenders worry if multiple applications appear in a short time. Space them out where possible.

Can I see who performed a credit check on my report?

Yes. Credit reports list all soft and hard checks, along with the date they were performed.

How long do hard credit checks stay on a credit report?

Most remain for 12 months, but their effect reduces over time.

What should I do if my credit score drops after a hard check?

Avoid new applications, keep repayments on track and let the score recover naturally.

Find car finance without putting your credit score on the line

Shopping for car finance? My Car Credit applications start with a soft credit check, meaning you can explore finance options without affecting your score. As your application progresses, lenders may then perform a hard check to process the finance agreement. Apply online today and find a deal that works without leaving a mark on your credit file.