Credit Score Basics > How does a credit check work in the UK?

How does a credit check work in the UK?

Wollit Team3 minute read · Updated 30th June 2024

A credit check is when a company checks your credit report to see how well you've managed money or credit in the past. It can also be known as a credit search or credit inquiry.

Credit checks are carried out by lenders like banks, building societies, and credit card providers. They can also be carried out by utility and mobile phone companies, landlords, letting agencies or even potential employers.

A credit check shows them details about your finances, such as existing debts and credit available to you. It will also show what happens if you ever miss paying back debt – by listing bankruptcies, payment defaults, County Court Judgements (CCJs) and Individual Voluntary Agreements (IVAs).

Lenders then use these credit checks to help them decide whether to accept your applications or not. These can include applications for loans, credit cards, mortgages, overdrafts, car finance, even mobile phone contracts.

How do credit checks work in the UK?

There are two kinds of credit checks: soft and hard checks.

Soft checks offer a basic look at your financial history without affecting your credit score. They are usually run for pre-approvals, insurance quotes, mortgage agreements, credit card eligibility, and by companies you already deal with. Soft checks are also run when you check your own credit report.

On the other hand, hard checks involve a detailed look of your financial past, impacting your credit score and being visible to others. These checks are usually done when a company is lending to you, like for a mortgage, loan, or credit card, or when providing services such as a mobile phone contract or rental property.

When a company wants to run a credit check, they must contact credit reference agencies like Experian, Equifax, or TransUnion and always obtain your permission.

Something to keep in mind: for hard checks, companies need your permission each time, but for soft checks, they only need it once – when you open an account with them. This allows, for example, your own bank to check if you qualify for a new credit card and send you a promotional email if you do.

What does a credit check show?

Credit reference agencies collect information from lots of sources, including:

The electoral register – this helps them verify your identity.
Court records – Defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcies.
Lenders and other service providers – details about your accounts, whether you paid your bills on time, and how much credit they made available to you.

Because of this, a credit check will show things like:

Whether you're registered to vote,
Your address history,
Your credit accounts, when you opened them, and whether you paid all bills on time
Whether you went through any CCJ, IVA, default, or bankruptcy,
And whether other lenders have run a check on you.

This also means that a credit check will not show:

How much money you have,
Whether you're employed or how much you earn,
Your medical history,
Or your criminal history.

One important thing to keep in mind here: a credit check will only show information that goes back 6 years. After 6 years, anything from a bankruptcy to a CCJ will be automatically removed from your credit report.

That doesn't mean it's gone forever – lenders might still ask you if you've ever declared bankruptcy, and you have to tell them – but at least it won't be immediately visible.

What else do lenders check?

A lender will usually do more than just run a hard check. A credit check will only show them if you're a good borrower and if you've managed debt well in the past. It won't tell them whether you can actually afford the loan.

This is why most banks, lenders, and credit card providers also ask for things like:

Employment details (like a P45 or P60, or your latest payslip),
Latest tax return (or your SA302 tax calculation if you're self-employed),
And bank statements.

This will help them understand what you can actually afford to repay, based on your income, outgoings, and anything you've already borrowed.

How can I see which companies checked my credit file?

You can see which companies have checked your credit file right on your credit report. To check your credit report, follow these steps:

Your Experian credit report: either request your free Experian statutory credit report or sign up for a free trial of Experian CreditExpert.
Your Equifax credit report: either get your free Equifax statutory report or sign up for a free ClearScore account.
Your TransUnion report: get your free TransUnion statutory report or sign up for Credit Karma (also free).

Once you have a copy of your credit report from a credit reference agency, you can easily see which companies have checked your credit file, what kind of credit check it was, and even why they checked your report.

How can I make sure I pass a credit check?

Going through a credit check can be stressful. To pass it, do these three things:

Get your credit report and even check your credit score to understand how lenders see you.
If you spot anything odd in your file, reach out to the credit reference agencies. Even if it's not a mistake, you might want to contact them so you can add a Notice of Correction. This is a 200-word note that gives you a chance to tell your side of the story. Lenders might understand if they knew you missed a payment, for example, because you were ill.
Finally, keep working on improving your credit score. One of the easiest ways to do this is to download a credit-building tool like Wollit.

Wollit is an app that turns your regular monthly subscriptions into a way to build a good credit history by reporting them as loan repayments. This helps you show lenders that you can manage your finances well and can reliably make debt repayments on time.