How Credit Checks Affect Your Score in Canada

When it comes to credit, there are hard inquiries and soft inquiries. They each affect your credit score differently. A hard inquiry happens when you apply for credit, like a new credit card or car loan or a mortgage. These are serious credit checks that can lower your score for a while. There’s an exception to this rule. If you’re shopping for a loan, there’s a window of time that can limit the damage of multiple hard inquiries at once. Let’s say you’re shopping for a car. Dealership A checks your credit to see how much you qualify for. Then a few days later, you visit dealership B, where they also see how much you can borrow for a car. A week later, you visit dealership C, where you apply for a loan and purchase a vehicle. The shopping window depends on how each credit bureau evaluates your score, but most of them group multiple credit applications into one inquiry if they happen within 14 to 45 days. Stick within two weeks to be safe.

A soft inquiry is usually part of a background check for a job or when a landlord checks your credit report or if you check your own report. A soft credit pull won’t affect your credit score at all. Hard inquiries can stay on your credit report for over two years, but your score is normally only affected for the first year. That means the record of it lasts longer than the actual score impact. So, what should you do to prevent a ding on your credit score?

First, get prequalified shopping for a loan. Those are soft checks and they won’t ding your score. Second, avoid applying for lots of credit at once. And third, if you’re rate shopping for an auto, mortgage, or student loan, apply within a short window, like we discussed.

If you want help timing applications or understanding your credit report, Consolidated Credit Canada can walk you through it. Visit consolidated creditcanada.ca for free guidance.

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