A credit check is a thorough assessment of all the credit accounts you possess and whether you have made the necessary repayments on time without defaulting or delaying payment. Banks normally run credit checks, credit card companies and other financial institutions that offer their customers a line of credit to assess their credit worthiness.

There are typically two kinds of credit checks – hard credit check and a soft credit check.

A hard credit check is usually run by a financial institution such as a bank that offers loans, money lenders or credit card companies before they decide whether or not to offer you a line of credit. When you place a request formally to your bank or money lender for a loan or apply to receive a credit card, such hard credit checks are normally initiated in the first step of the process of verification. A hard inquiry may be initiated by a bank or financial institution only after you authorise it. Usually, hard credit checks are initiated following an application for a housing loan, an automobile loan, a student loan, a mortgage application or when you apply for a credit card. Depending on your current credit standing, based on history such hard credit checks may affect your credit scores negatives, causing the score to drop. However, the credit score changes with very on time payment made. Some hard credit inquiries may even appear on your credit score for two or more years, but as your credit status improves, these hard inquiries are usually dropped off.

A soft credit check usually happens when you apply for a job, and your prospective employer initiates a check on your credit report as part of a routine enquiry into multiple aspects of your background, to assess your employability. Most companies may not require your authorization to initiate a soft credit check. Soft credit checks may also be initiated when you apply to open an account with a bank or when you wish to rent an apartment. Depending on the credit bureau used, your credit score may be recorded. However, soft credit check inquiries are not likely to reflect adversely on your credit score or impact on your credit standing in any way.