Hard Credit Search

Meaning and Definition

A hard credit search, also known as a hard inquiry or credit check, is a thorough examination of an individual's credit history and creditworthiness performed by a lender or financial institution. A hard credit search involves accessing the individual's credit report from a credit reference agency and leaves a record on their credit file. It is typically conducted when a person applies for new credit, such as a car finance loan, and can impact their credit score.

Why it is important to know

Understanding the concept of a hard credit search is important as it helps individuals assess the potential impact on their credit score and creditworthiness when applying for car finance or other forms of credit. Multiple hard credit searches within a short period may indicate a higher level of risk to lenders and could potentially lower the individual's credit score.

Example in car finance

Suppose you decide to apply for car finance from a lender. As part of the application process, the lender conducts a hard credit search to assess your creditworthiness and determine the terms of the loan. The lender accesses your credit report from a credit reference agency, which shows details of your past credit history, outstanding loans, and payment records. The hard credit search will be recorded on your credit file, and multiple hard searches within a short timeframe can have a temporary negative impact on your credit score.