When it comes to the business end of a finance application, you'll go through something called a 'credit check'.
This is the step of your application where you'll find out if you've been fully accepted for credit, and whether you're able to proceed with setting up the agreement.
What is a Credit Check?
Credit checks are used when you apply for finance, loans, credit cards, rental agreements or some services.
A credit check is when a lender or organisation reviews information from your credit file to understand how you have managed borrowing in the past. This may include credit cards, loans, overdrafts, mortgages, store cards, missed payments and other financial commitments.
There are two main types of credit check; a soft credit check and a hard credit check.
A soft credit check is usually used to check eligibility and does not normally affect your credit score. A hard credit check is typically used for a full credit application and may appear on your credit file.
Your credit history is only one part of the decision. Lenders may also look at your income, outgoings and existing commitments to decide whether the agreement is affordable.
'Soft Search' vs 'Hard Search'
A Soft Search will:
- Give a general understanding of your credit history
- Give a picture of your ability to manage loan repayments
- Not affect your credit rating
A great example of a Soft Search is our online eligibility form.
If the soft check looks favorable, then you can agree to be put through a Hard Search to continue the financing process.
A Hard Search will:
- Perform a full, comprehensive check of your credit history
- Be the decision maker on whether you're ultimately accepted for finance
- Appear on your credit history (regardless of the outcome)
The hard search process might negatively impact your credit rating, therefore you should always give consent before proceeding.
Meanwhile, several hard checks in a short amount of time raises an alarm for lenders, as it shows potential desperation for credit.
What will be checked when applying for finance?
A credit check considers such factors as:
Your registered address - If you’re registered on the electoral roll, your address will show up on your credit report, plus any prior addresses in the last six years. Lenders review the data to determine how stable your circumstances are. Relocating frequently in a short period of time may be cause for concern.
Your payment patterns - Your credit report will indicate if you have ever missed a payment or if you consistently make the minimum, on-time, and full repayments.
What you currently owe - Lenders will be keen to know any current debts you may have, including your mortgage, credit cards, or store cars. If your current debts are already close to overlapping with your income, then lenders may not want to allow you to borrow more money.
Public and court records - Any CCJs, IVAs, or bankruptcy declarations will appear on your credit record. It will also display how any arrangements are managed. The longer they have been fulfilled, the more it will work in your favour. It's also important to know that any ties you have with others who have had troublesome credit histories may affect you too.
Your history of applications - Lenders can see each time a hard search has been performed against your profile. With this in mind, they will be wary of anyone applying for credit too many times in too short a time, usually a three-to-six-month period.
What shows up on a credit check?
Your credit history consists of all of your previous credit accounts, including loans, credit cards, mortgages, and so on, together with your usage patterns.
In addition, it will also contain all histories of any such aspects as CCJs, IVAs, or defaults.
When a hard credit check is performed, all such factors are laid bare for the lender to see.
You'll also be able to see the same information when you check your credit score, as well as any previous credit searches.
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Can I check if I am eligible for car finance without affecting my credit score?
When applying for car finance through Stoneacre, we conduct a soft search, which will not affect your credit score at all, and simply gives us insight into whether you are eligible.
This soft search will not leave a visible mark for other lenders to see, nor will it affect you in any negative way.
If you are cleared via the soft search, we will then proceed with a hard search as the process continues, leading to the final decision of whether you are accepted.
We offer a free eligibility checker which can help you understand your finance options before deciding to continue with your options. If you choose to proceed, then this is when a hard credit check would be required as apart of the final decision.
Does passing a credit check guarantee car finance?
Although passing a credit check does improve your chances of acquiring car finance, it does not guarantee it.
It is a very important step of the lenders decision, but they will also consider other information, such as your income, existing commitments, employment status and address history. All of this is included within our eligibility check form, which makes the process much simpler.
However, filling out this form is not a guarantee of car finance, as the ultimate decision is up to the lender.
If they choose to not proceed, then Stoneacre is capable of helping you find a lender criteria and finance solution that fits your personal circumstances.
Credit Check FAQ
Representative Example
This represents an average of the deals that our customers receive on other vehicles
We are a credit broker and a lender. We can introduce you to a limited number of lenders and their finance products. We will provide details of products available, but no advice or recommendation will be made. You must decide whether the finance product is right for you. We do not charge you a fee for our services. Lenders will pay commission to us (either a fixed fee or a fixed percentage of the amount you borrow) for introducing you to them, this may be calculated in reference to a variable factor such as (but not limited to) the vehicle age, your credit score and the amount you are borrowing. Different lenders may pay different commissions for such introductions. Offers available to everyone over the age of 18, subject to credit approval.