What Is a Credit Check and how does It work?

Applying for credit can feel a bit like stepping onto financial scales in public. But fear not—your habits are weighed not to criticise, but to assess whether the loan is a good match.

Credit checks are part of the process when you're renting a property, considering a loan with Credit24, or even applying for a job. Understanding how they work makes it easier to make informed decisions and avoid surprises.

What is a credit check and why is it important?


A credit check is an official evaluation of your credit history and financial reliability, typically conducted by a lender, landlord, or other authorised organisation. It helps them assess how likely you are to repay money on time. This assessment plays a key role in decisions about loans, rentals, and other agreements involving financial trust.

These checks matter because your credit history can influence whether you're approved for loans, offered competitive interest rates, or even considered for specific roles or rental agreements.

Typical situations where credit checks apply:

• Applying for a credit card or a personal loan

• Renting a house or apartment

• Setting up utility accounts

• Subscribing to a mobile plan

• Applying for certain jobs, especially in finance or government

A credit check doesn't reveal everything about you, but it does provide a snapshot of how you've managed credit in the past.

Hard vs soft credit checks in Australia


Creditors may conduct two types of credit checks when assessing applications: hard and soft checks. These are carried out by credit reporting bodies and serve different purposes. A hard credit check can impact your credit score and is recorded on your credit report. A soft check, however, has no impact on your score and may not be visible to other lenders.

What appears in a credit check:

• Your credit accounts (loans, cards, etc.)

• Repayment history

• Any overdue accounts or defaults

• Court judgments or bankruptcies

• Credit limits and balances

What doesn’t appear:

• Your income or employment details

• Centrelink or child support payments

• Everyday bank transactions

• Rent payments (unless referred to a debt collector)

Common misconceptions about credit checks

Many people believe credit checks reveal more than they actually do.

Here are some common misunderstandings:

Credit checks show your savings- it doesn't. Your savings, investments, or superannuation balances are not part of your credit report.

Checking your own credit score lowers it- Sometimes, Personal credit checks are often soft enquiries.

All credit checks hurt your credit- Only hard enquiries can influence your score, and their impact tends to be small and short-term when managed responsibly.

Multiple checks mean you're in financial trouble - Not necessarily. Several enquiries in a short time may signal risk to lenders, but comparing offers (especially in a short window) is common and reasonable.

How do credit checks work?

A credit check usually starts when you apply for a loan, a service, or anything that requires a better picture of your financial habits. The process begins once you give consent, typically by ticking a box or signing a form.

Here's how it works:

• You provide consent. That part's usually quick and digital.

• The provider contacts a credit reporting body.

• Your details are matched to your credit file.

• The report is generated and sent back.

• The provider reviews it and decides what happens next.

Where does all that information come from?

It's pulled together from a few places—your bank or lender, utility and phone companies, and even public records like court data. The goal? To see how you've handled credit in the past.

What gets checked?

This isn't about spying on your spending. It's about spotting patterns.

Lenders look at:

• How many credit accounts you currently have

• Whether you've been paying on time

• If you've defaulted on anything

• How much of your credit you're using

• When and how often you've applied for credit before

• A consistent repayment history shows reliability. Too many missed payments or sudden credit activity might cause hesitation.

How long does it take?

The check itself usually takes just a few minutes. But depending on the lender, the decision might take a bit longer, especially if they need more info from you.

What are lenders looking for?

Every lender assesses credit checks differently. Some focus on recent history, while others take a more holistic approach.

Most of them consider:

• Whether your current income supports new repayments

• The kind of credit you've used

• How steadily you've met your repayments

• How recently—and how often—you've applied for credit

At Credit24, we know a number doesn't tell the full story. That's why we look at your situation as a whole, not just the data on the page.

Who can do credit checks?

Can just anyone run a credit check on you? No, they cannot. Credit checks aren’t something anyone can do just out of curiosity. By law, an organisation needs a valid reason or your permission before accessing your credit report.

Credit checks usually happen when you’ve applied for something that involves borrowing, signing a contract, or entering a financial agreement. You’ll always be asked to give consent, usually as part of the application process.
Credit checks are typically conducted by:

Lenders and banks – when you apply for a personal loan, credit card, or mortgage.

Telecommunications companies – when setting up a postpaid phone or internet plan.

Utilities providers – electricity, gas, and water companies may check before starting service.

Real estate agents or landlords – especially for long-term rental agreements.

Insurance companies – in some cases, when offering policies that involve payment plans.

Employers – usually for jobs in finance, law, or government roles that involve handling sensitive information.

Debt collectors – when acting on behalf of a creditor, within legal boundaries.

Does a credit check affect your credit score?

Whether your credit score will be affected depends on the type of check.

Soft credit checks

These are entirely risk-free. A soft credit check does not have an impact on your credit score in any way. It happens when:

you check your own credit report

a company does a pre-approval assessment

you're applying for a job that requires a background check

Soft checks may appear on your credit report (depending on the provider), but they're not visible to other lenders and don't influence your score.

Hard credit checks

Hard credit checks can potentially lower your credit score, especially if several appear in a short period.

A hard enquiry is triggered when you formally apply for credit, like:

• a personal loan
• a credit card
• a mortgage
• finance for a car or a large purchase

A hard check signals to lenders that you're seeking new credit. One or two hard checks are completely normal. But multiple applications close together can make lenders cautious—they may assume you're under financial pressure.

So, while a hard check doesn't automatically harm your score, it's smart to be selective and space out applications when possible.

How long do credit inquiries stay on your credit report in Australia?

The time a credit inquiry stays on your report depends on the type of check.

Hard inquiries remain on your credit report for five years, whether your application is approved, declined, or withdrawn.

The good news is that most scoring models focus more on recent activity. That means, inquiries older than a year usually carry less weight.

Soft inquiries may appear on your report, but they’re not visible to other lenders and do not affect your credit score.

In many cases, they disappear within 12 to 24 months, if recorded at all.

Credit check fees and costs

In Australia, checking your own credit report is free.

However, note that you’re entitled to only one free credit report per year from each of the three major credit reporting bodies:

• Equifax
• Illion
• Experian

If you've recently corrected your credit report or been refused credit within the last 90 days, you can also request an additional free copy.

There are services that offer paid options with extras like:

• Credit score tracking
• Identity monitoring
• Instant access to updated reports
• Alerts when something changes

In most cases, the free version is more than enough for you to stay informed.

So if you’re just curious or doing a financial health check, no need to pay extra.

Best tips to avoid too many credit checks


Here are a few smart habits to help keep your credit report clear:

1. Space out your credit applications
Avoid applying for loans or credit cards too often in a short period. Each application triggers a hard inquiry, and too many at once can make lenders cautious.

2. Use eligibility checkers
Many lenders offer pre-approval tools that use soft checks. These let you see your chances without affecting your credit score.

3. Don't co-sign unless you're sure
If you co-sign someone else's loan and they miss payments, it could appear on your credit file too. Be confident before saying yes.

4. Pause after a rejection
If your application is declined, take a step back before applying again. It's better to address the issue than to rack up more hard checks.

5. Keep your accounts in good shape
Timely payments, low credit utilisation, and consistent habits help reduce the need for new credit and the inquiries that come with it.