How do credit checks work?

When applying for invoice financing we check the financial status of both the company applying and the individuals who are in control of the company (Directors and Shareholders). By reviewing this information, we understand your financial situation and the health of your business.  To undertake these checks, we use one or more of the 3 main credit reference agencies in the UK: Experian, Equifax or Call Credit.  Credit checks on companies do not require explicit permission but a credit check on an individual does, so we ask for this, for permission as part of our application process.

What lenders see when they check your personal account

By running a credit check on your file, the lender will receive your credit score, which ranges from 0 (very poor) to 999 (very good). This score or ‘rating’ gives lenders a number that they can work with and they can accept customers based on their scores or allocate different interest rates accordingly.

When checking someone’s file, the following information will be made available

- Your full name and date of birth

- Electoral roll information to confirm your current and previous addresses

- All loans, credit card, and mortgage accounts that are open, including their start date and loan amounts. All accounts closed in the last six years will be listed.

- Current account overdraft

- Previous application searches and footprints

- Joint accounts with other people e.g spouses

- Any missed repayments and the number of times it has happened

- History of debt including bankruptcy and CCJs

- Information on whether your identity has been used for fraud

Lenders will leave a footprint

When a lender performs a credit check on you, it will leave a footprint on your account. This is a visible mark on your credit file stating that they have made the search.  As other credit companies run a credit check, they will see how many other footprints have been made. If a lot of applications have been made in a short space of time, it suggests that the individual might be more desperate for money and therefore a riskier person to lend to.  A hard footprint is visible on the individual’s file for around 12 months. This is different to a soft footprint, which might be used on a person close to the applicant if they share a joint account. Understanding the finances of someone they share an account with can give the lender some insight into their overall financial situation. But since the other person didn’t apply directly, it is considered a soft search so it won’t leave a permanent mark or affect their chances of getting future credit.