How Does a Credit Check Work?

Author · Modified on 20 October, 2023

A credit check occurs when your credit history is assessed. This allows a lender to decide whether they want to be your lending partner, based on your record.

A credit check is carried out automatically whenever you apply for a loan, and it is an easy way for a lender to assess your eligibility for a loan. However, you should bear in mind that a bad credit score will not necessarily affect a lender’s decision to issue your loan. See bad credit loans for more information.


Key Points:


  • In a credit check, your past loans, debts and other financial events will be disclosed confidentially to the company accessing it.
  • Your credit score will also be disclosed. A credit score is a number between 300 and 850, and the higher the better. With a credit score below 600, you may struggle to get a loan.
  • It is possible to attain a loan without a credit check.
  • A credit check won’t impact your credit score.


A credit check is a financial check which is automatically carried out when you apply for any kind of loan.


What is a Credit Check and How Does a Credit Check Work?


In short, a credit check is a financial check which is automatically carried out when you apply for any kind of loan.

A credit check will be part of the application process for any loan and will mean that the lender will be able to accurately assess whether you can afford to repay the loan. By accessing details of your financial situation and history, a lender will be able to better assess your worthiness for a loan.

It is also not uncommon to have a credit check when renting out an apartment, taking out insurance, buying a cell phone or even getting a job.


How is a Credit Check Done?


A lender will pay an agency to access your information in order to carry out a credit check. Usually, before a check is carried out a lender will ask your permission to access your information.

Once the lender has access to your financial information, they will be able to see what current financial commitments you have and better assess whether you can afford a loan.

A credit check is carried out automatically, and you do not need to compile the information yourself.


What Does a Lender See During a Credit Check?


When a payday lender performs a credit check, they will be able to see your basic personal information, financial history, and current circumstances. A lender can view your full name, date of birth, and electoral roll information, which confirms your current and previous addresses.

On top of this, when performing a credit check, the lender will have the ability to view all loans, credit card and mortgage accounts that are open, their start date and loan amounts. All accounts closed in the last six years will be listed.

They can also see your current account overdraft, previous application searches and footprints, any missed repayments and number of times it has happened, history of debt including bankruptcy and CCJs and information on whether your identity has ever been used for fraud.

You will typically have a credit score, where the higher the score, the better and lenders may have a cut off or threshold with a number that they are usually willing to lend to.

Anything from 698 – 749 is considered good credit, 750 – 884 credit score is excellent.




Do I Need a Credit Check To Get a Loan?


Yes, you will need to have a credit check if you wish to apply for a payday loan.

A credit check is a mandatory and automatic part of the loan request process for a payday loan. It allows the payday lender to make an informed decision on providing you with the money you need.

This does not mean that you will be denied a loan if you have a poor credit score. Dime Alley’s partner lenders’ consider loan enquiries from a range of credit histories. However, a credit check is still always carried out.


Will My Credit Score Be Affected When I Apply For a Loan?


Most lenders will carry out a soft credit check initially when you apply for a loan – and this will disappear shortly after and not have any negative impact. However, if you make a number of loan applications in a short space of time, with the same or multiple lenders, this could make you look financially desperate, or even a victim of fraud, so your credit score may start to fall and you become less attractive to potential lenders.

It is normal to have around 12 credit searches against you per year – but if you have hundreds, this it not going to look particularly good. See will a loan affect my credit score for more information.


Is My Information Kept Securely?


Yes! When a credit check is carried out, it is to assess your application and intended to help you secure a loan. The information that is disclosed during your credit check will be kept securely between parties involved in the lending process and won’t be passed on to anyone else.

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