The Business Bulletin
Credit searches and the impact on your credit score More people are looking at credit solutions to help their businesses navigate these unprecedented times I thought it would be helpful to understand the different types of credit search and the impact of each on a credit rating.
What is a credit search? In simple terms searches, or credit checks, as they are sometimes called, are when someone looks at your credit report to find out about your borrowing history. There are two types of searches, known as soft searches and hard searches, it is important to know the distinction between the two
Sometimes other types of companies
when a lender takes an in-depth look
report, such as a potential employer
at your credit report and associated
or landlord, if they want to see how
credit score. This type of credit check
well you handle your finances. Debt
leaves a mark on your credit report,
collection agencies may also check
for 12 months, there are exceptions
your credit report if they’re trying to
to this which I will come back to.
find out more information about you.
The prospective lender can not only
Now we have looked at who could
of these as the impact they have on
ask to see your credit report, I want
your credit file is quite different.
explain the two different types of
A credit report allows potential lenders to look at your credit history, with your permission, to enable them to decide on whether or not to lend to you. Lenders will use your credit report to assess the level of risk they will be undertaking. The things they will look at include some obvious ones: for example if you’ve paid back your debts in the past, how you’ve paid it back, was it on time or were some of the payments late. They will also look at how much debt you currently have. All of these factors will give you a credit score, which they will look at too, but since a credit score only gives an indication of what’s in your credit report, they won’t use this alone to make a lending decision. It won’t always be lenders that want to look at your credit report.
12 | Issue 1 – Finance
A hard search, on the other hand, is
may ask your permission to check your
see what credit you applied for, but
checks that can be carried out on your credit report, and which of these might affect your credit score. Firstly, the soft search. This is a preliminary credit check. It means a lender will search for some information about you, but will not see all of your credit report information. These types of credit checks are only visible to you. You can have unlimited soft searches on your credit report without it having any impact on your credit score. You can see these on your credit report for 12 months. Soft searches include when you check your own report, when your report is accessed for the purpose of an identity check, or when a lender wants to show you your eligibility for a new financial product (always check this carefully, to avoid a mark on your report).
Wendy Tate Bean Counters Bean Counters is a forward thinking Accountancy practice, specialising in Xero Cloud-Based Software and have been a Xero certified practice since 2014. Whether your business is new or old it needs efficient accounting services for growth and sustainability, we offer an outsourced accounting solution tailored to your needs. So speak to us about your bookkeeping, payroll, VAT and compliance needs. 07810 562295 wendy@bean-counters.co.uk bean-counters.co.uk
