When applying for finance in the UK, knowing the difference between a soft credit check and a hard credit check is essential. Credit checks are how lenders review your credit history before approving loans. A soft credit check (also called a soft search or soft inquiry) is a preliminary check that does not affect your credit score.
In contrast, a hard credit check is a full review that may impact your credit score and is recorded on your credit file. In other words, a soft check gives lenders a snapshot of your credit, while a hard check is a commitment to borrowing that leaves a “footprint” on your report.
What is a soft credit check?
A soft credit check is like a quick peek at your credit profile. It happens when you or a lender check credit eligibility without submitting a formal loan application – for example, identity checks, pre-approval quotes, or when you check your own credit report.
Because it’s only a light check, a soft search won’t leave a visible mark on your file or change your credit score. UK credit reference agencies record soft searches on your file for transparency, but other lenders cannot see them. This means you can safely use online tools or comparison services like Rise Funding’s eligibility check to explore business loan options without hurting your credit.
What is a hard credit check?
A hard credit check happens when you formally agree to a credit offer, for example, a business loan, mortgage, or credit card. During a hard search, the lender reviews your full credit history in detail. Unlike a soft check, a hard search is visible to lenders and does leave a “footprint” on your credit report. Each hard inquiry may slightly lower your credit score, especially if you have many in a short period. Lenders view multiple hard checks as a potential red flag (it could suggest you’re seeking lots of credit quickly, and also not committing to application). In short, a hard check is high-stakes – it’s part of the formal approval process and should be used only when you’re ready to borrow.
Here are some of the key differences between soft and hard checks:
| Soft Credit Check | Hard Credit Check | |
| Purpose | Preliminary eligibility check (or self-check) | Agreeing to a formal loan/credit application |
| Impact on score | No impact (score unaffected) | May lower your score (leaves a ‘footprint’) |
| Visibility | Only you can see it (not visible to lenders) | Recorded on your credit report (visible to lenders) |
| Example use | Checking your business credit or getting pre-approval quotes | Agreeing to a business loan or credit card |
This comparison shows that soft checks are low-risk and let you check or compare loan options freely, whereas hard checks are high-stakes and should only be done when you’re ready to commit.
Why it matters for business loans
Understanding these differences is crucial when preparing to apply for a business loan in the UK. Many lenders and brokers like Rise Funding use soft searches so you can compare deals first. Many online eligibility tools use a soft credit check, letting you see if your loan application is likely to succeed before you formally look to proceed with an offer. In both cases, you can gauge your chances of approval without affecting your credit.
However, once you submit a full loan application, the lender will run a hard credit check. This check is a key part of the decision process, and multiple hard inquiries could slightly reduce your credit score. In practice, this means you should prepare carefully in advance. By the time the hard search occurs, you want your credit history and finances already in good shape, so the inquiry simply confirms your strong profile.
What lenders look for in a credit check
When assessing a business loan application, UK lenders typically examine both your business and (if relevant) personal credit details. Key factors include:
Business credit history
Lenders review your company’s credit report for on-time repayments, outstanding debts, and public records (like County Court Judgments or bankruptcies). A clean history (no late payments or defaults) is important. In fact, the British Business Bank advises that your business should have no recent late payments or CCJs to be approved.
Business credit score
This numerical score (from agencies such as Experian, Equifax, Creditsafe or Dun & Bradstreet) reflects your company’s creditworthiness. The higher your business credit score, the better. Your score directly impacts approval odds.
Personal credit score
For small or new businesses (sole traders, partnerships, or very young limited companies), lenders often check the owner’s personal credit history too. If either your business or personal credit score is poor, you may find it harder to get a loan or to secure good interest rates.
Financial health and affordability
You must show your business can afford the loan payments. Lenders expect to see profit & loss accounts, bank statements, cash-flow forecasts, etc. The loan amount offered will depend on demonstrating affordability.
Security or collateral
If the loan is secured, lenders will also consider the value of any assets you can pledge (e.g. property or equipment).
Business age and industry
Established businesses with proven track records and operating in stable industries generally qualify more easily than very new or high-risk ventures.
Checking your credit and using soft checks
Before applying, it’s wise to review your own credit using soft checks. In the UK, you can get your business credit report from the main credit reference agencies – Experian, Equifax, Dun & Bradstreet and Creditsafe. Many of these agencies offer free basic reports or trial subscriptions. For example, Experian’s “My Business Profile” service lets you view your business credit score and report for a free trial period, and Creditsafe’s basic report (showing your real-time credit score and key data) is often free. Under UK law (the Consumer Credit Act and GDPR), you have the right to request a copy of any business credit report that an agency holds on your company.
These tools allow you to check your business credit score and spot any issues (like incorrect listings) before you apply. Importantly, because these checks are soft searches, they do not harm your creditworthiness. Another plus: under the UK’s Commercial Credit Data Sharing (CCDS) scheme, banks automatically share SME account data with credit agencies, so your normal business banking history feeds positively into your credit file.
By regularly using soft credit checks, you can correct any errors and improve weak areas (e.g. paying off debts) in advance. This way, when it comes time to apply for a loan, your credit files will present the best possible picture.
Preparing for a business loan
To maximise your chances of getting approved, prepare thoroughly:
Gather documentation
Have your financial documents ready – for example, recent bank statements, full business accounts (profit & loss, balance sheet), tax returns, and a solid business plan. If you’re a limited company, include filed company accounts; if you’re a sole trader or partnership, prepare personal financials and credit reports.
Check and improve credit
Use the soft-check tools above to verify both your business and personal credit scores. If you find problems (such as a County Court Judgment or late payment record), take steps to address them or wait until they age off. Maintaining good credit habits (paying invoices on time, keeping borrowing under control) will strengthen your profile.
Affordability and security
Prepare cash-flow forecasts and budgets to show the business can afford the loan. Decide whether you can offer collateral or a personal guarantee to make your application stronger.
Meet basic criteria
Ensure you meet standard lender requirements – for example, your business should be UK-based and able to demonstrate the ability to repay.
Use preparation guides
Follow a checklist or guide to make sure you haven’t missed anything. For example, Rise Funding offers a Business Loan Preparation Guide with tips on organising your application, and a Business Credit Score guide to help you understand and check your credit.
By doing this groundwork, when you finally submit your loan application (and trigger the necessary hard credit check), you’ll be showing lenders that you already have your finances in order. This should help your application sail through smoothly.
Applying for your business loan
After preparation, you’ll be ready to apply. Our forthcoming article “How to Apply for Business Loans” will cover the application process in detail. In the meantime, you can start by using our instant business loan quote form. This online application begins with a soft credit check, so your credit score isn’t affected at that stage. Once you select a lender and move forward, a final hard credit check will be part of the formal approval process, but by then your documents and credit record will already be in good order.
Conclusion
Understanding soft vs hard credit checks lets you apply smarter. Use soft checks freely to verify your credit standing and shop around and only undergo hard checks when you’re confident. This strategy helps you secure the best possible business loan terms in the UK without inadvertently harming your credit score.
If you are looking for a loan, Rise Funding can help find the best option for you. Whether it’s a business loan or others, we’re here to help you make a decision with confidence.
Contact us via the form below, or get an instant business quote through our online questionnaire.
