Do credit applications affect my credit score?

Applying for credit can be daunting – questioning whether it’s going to be successful, and if it’s not, wondering how many more applications you’ll need to make in order to get the credit you need.

But how much do credit applications actually affect your credit score? Let’s learn about the effects of credit applications and whether they’ll impact your eligibility in the future.

What happens when you make an application?

When you apply for credit, you’ll usually be agreeing to a hard credit check – the lender will then take a look at your credit report via one or more of the credit reference agencies: Experian, Equifax, and TransUnion.

They’ll see your credit history, your repayment behaviour, if you’re on the Electoral Roll, whether you have any County Court Judgments, and lots more. They may also look at factors not on your credit report like your employment status, income, and your usual outgoings. From all that, they’ll then decide how much of a risk it would be to lend you money.

A lender won’t make their decision based on the credit score you see – this is a number to summarise the information in your credit report for your benefit. Lenders use the data in the report and their own criteria to create their own score. Your score helps you spot where you're doing well and where you can improve, but it doesn’t guarantee a specific outcome to your credit applications.

The difference between hard and soft searches

What you’re applying for and who with will affect what type of search is done.

A ‘hard search’ is also known as an ‘application search’. This is when a lender runs a full credit check to view all the information in your report. You should be aware of all hard searches as you need to give permission for this to go ahead.

Duration: Depending on which agency the hard search was completed with, you’ll normally be able to see it on your report for 12-24 months.

Effect: One hard search isn’t going to have a significant impact on your credit health. A credit application here or there is normal behaviour as you take those steps throughout life. But applying for multiple credit products in a short space of time can come with warning signs for lenders. Are you too reliant on credit? Have other applications been declined by other lenders? Have you had multiple new credit agreements approved already?

A ‘soft search’ usually relates to an ‘enquiry’ or ‘audit’. Some lenders will let you see your chances of being approved with an ‘eligibility checker’, and some may tell you that you’ve been ‘pre-approved’ or even have a ‘guaranteed approval’. They’re able to do this by carrying out a soft search. Soft searches can also show when your existing lenders carrying out regular reviews on your details, or after using price comparison websites.

Duration: Soft searches will also show on your report for 12-24 months, depending on the agency the search was completed with.

Effect: A soft search won’t affect you, unless it’s made for debt collection reasons.

When would a lender do a hard search?

A good rule of thumb is that if you’re going ahead with an application for credit, rather than requesting a quote or checking your eligibility, you can expect a hard search to be done. You’ll likely see a hard search when:

• You make a mortgage application.

• You make a loan application.

• You make a credit card application.

It’s common to see a soft search when:

• You’ve asked for a mortgage agreement in principle.

• You’ve used a website to compare quotes for a loan.

• You’ve checked your credit card eligibility.

These are just examples. If you're unsure, we recommend asking the lender what type of search they’ll do. Remember, they can’t perform a hard check without your permission.

To recap

A single credit application doesn’t necessarily affect your credit score, but the more there are, the more they can. A key takeaway is to remember that lenders can see the search, but not the result. So as far as they’re concerned, you may be shopping around, you could also be applying for multiple products in a short space of time or going from lender to lender each time you’re declined.

There’s technically no limit to how many applications you make, but it’s best to only apply for credit you need and can afford. And, of course, if you don’t need credit, don’t apply for it just to try and improve your credit score.