ADVICE
Soft Credit Checks vs Hard Credit Checks: What's the Difference?
4 minute read
Introduction
If you’re researching personal loans, car finance or any other credit product in Australia, you’ve probably come across the terms ‘soft credit check’ and ‘hard credit check’. Understanding the difference isn’t just useful knowledge — it can have a direct impact on your ability to access finance.
One type of enquiry can reduce your credit score and stay on your file for years. The other leaves no trace at all. And critically, many Australian borrowers don’t know which one they’re agreeing to when they complete an online application form.
What Is a Credit Enquiry?
A credit enquiry is when an authorised party — such as a lender, broker or employer — accesses your credit report. In Australia, credit reports are maintained by three main credit reporting bodies: Equifax, Experian and illion. Your report contains all current and closed credit accounts, repayment history, credit enquiries, defaults, court judgments and bankruptcies.
Soft Credit Checks: What They Are and How They Work
A soft credit check is a limited review of your credit information, providing a general overview without triggering a formal credit assessment.
Does not affect your credit score in any way
Is not visible to other lenders on your credit report
Does not require your explicit consent in all circumstances
Is used for pre-assessment, background checks and identity verification
New Way Finance uses soft credit intelligence when pre-assessing your application, allowing us to evaluate your profile across our lender panel without leaving any mark on your credit file.
Hard Credit Checks: What They Are and How They Work
A hard credit check is a formal access of your full credit report, made as part of a credit assessment. Hard enquiries are the standard when you apply directly to a lender.
Is recorded on your credit file
Is visible to other lenders for up to five years
May reduce your credit score — particularly if multiple occur in a short period
Requires your consent
Cannot be removed before the retention period expires, even if the application was declined
Side-by-Side Comparison
Feature | Soft Credit Check | Hard Credit Check |
|---|---|---|
Affects credit score? | No | Potentially yes |
Visible to other lenders? | No | Yes — up to 5 years |
Requires your consent? | Not always | Yes |
Recorded on your file? | Not visible to lenders | Yes — formal record |
Typical use | Pre-assessment, identity checks | Formal loan applications |
Impact of multiple checks? | No impact | Can lower score significantly |
Why Multiple Hard Enquiries Are Damaging
If a Gold Coast resident applies directly to five different lenders over four weeks, five hard enquiries appear on their credit report. Lenders reviewing this pattern may interpret it as financial distress or poor financial management — even if the applicant’s income and repayment history are excellent. This is known as ‘rate shopping damage’.
When Hard Enquiries Occur
Formal personal loan applications
Home loan or mortgage refinancing applications
Credit card applications
Car, caravan or equipment finance applications
Buy-now-pay-later products (varies by provider)
Some telecommunications contracts
How to Protect Your Credit File While Comparing Loans
Working with New Way Finance as your finance broker means we assess your profile using soft credit intelligence, compare your profile against our panel internally with no enquiries generated, present your best-match options with indicative rates, and only submit a formal application — and potential hard enquiry — when you choose to proceed. One targeted hard enquiry at most.
What Is Comprehensive Credit Reporting (CCR)?
Since 2018, Australia has operated under Comprehensive Credit Reporting. Credit reports now include positive information — consistent on-time payments, account limits, open/closed status, and account types. A strong repayment history can now actively help your credit score, not just the absence of bad marks.
How to Check Your Own Credit Score Without Affecting It
Checking your own score is a soft enquiry with no impact. You can access your credit information for free through Equifax (equifax.com.au), Experian (experian.com.au), illion (illion.com.au), or MoneySmart (moneysmart.gov.au).
Frequently Asked Questions
Q: Do comparison websites perform hard credit checks?
Some do, some don’t. Many trigger a hard enquiry when you submit an application. New Way Finance does not perform hard enquiries during pre-assessment. Always check terms before submitting personal details to any online comparison tool.
Q: How long do hard enquiries stay on my credit report?
Five years from the date of the enquiry, regardless of whether the application was approved or declined.
Q: Will one hard enquiry significantly affect my score?
A single hard enquiry typically has a minor effect. The bigger impact comes from multiple enquiries in a short period.
Q: Can I dispute a hard enquiry I didn’t consent to?
Yes. Contact the lender first, then dispute with the relevant credit reporting body if needed.
ABOUT THE AUTHOR
Olivia Hart
