Hard vs Soft Credit Checks in Canada: What Affects Your Score

What a credit inquiry is

Your credit report, held by Canada's two main credit bureaus, Equifax and TransUnion, includes a record of who has requested your report. The Financial Consumer Agency of Canada (FCAC) notes that when a lender or organization checks your credit, it creates an inquiry on your credit report, and that a report can show inquiries from lenders over the last three years.

Inquiries fall into two broad types. A hard inquiry is recorded when a lender or company reviews your report as part of an application for credit. A soft inquiry happens when your report is viewed for other reasons, such as when you check it yourself. Lenders can see hard inquiries when they review your file; soft inquiries don't factor into your credit scores.

If you're new to how scores work, our guide on credit scores in Canada covers the bigger picture.

What triggers a hard credit check

Equifax describes a hard inquiry as one recorded when a lender or company reviews your credit reports as part of a loan application. Common examples include:

• Applying for a credit card, whether you're approved or not.
• Applying for a mortgage, including many mortgage pre-approvals.
• Applying for a car loan, personal loan or line of credit.
• Asking for a credit limit increase, at some issuers.
• Some applications for services, such as financing a phone or setting up certain accounts, depending on the provider.

Because practices vary, the safest approach is to ask before you apply: 'Will this involve a hard credit check?' A lender should be able to tell you. If you're thinking about asking for more credit on an existing card, our guide on credit limit increases explains what to expect.

What counts as a soft credit check

Soft inquiries don't affect your credit scores. According to Equifax, soft inquiries can result when you check your own credit reports or when a promotional credit card offer is generated. Other common examples include a lender you already do business with reviewing your account, and many 'see if you're pre-qualified' tools that use a soft check before you formally apply.

The FCAC is clear on the most important point: checking your own credit report or score doesn't affect your credit score. You can and should review your reports regularly, from both bureaus, to catch errors and signs of fraud. Our guide on how to check your credit score for free explains how.

Be careful with the phrase 'pre-qualified'. Some offers use a soft check to estimate your eligibility, but the formal application that follows usually involves a hard check. Read the fine print before you click 'apply'.

A useful rule of thumb: if you're giving consent for a new lender to assess you for credit you don't yet have, assume it's a hard check unless you're told otherwise. If you're simply looking at your own information, or a company you already deal with is reviewing your existing account, it's typically a soft check. When in doubt, ask, and get the answer before you hand over your consent.

How much a hard inquiry affects your score

Equifax says a hard inquiry usually will impact your credit scores, and that it can signal to lenders that you're shopping for credit. The effect of a single inquiry is generally modest, and how often you apply for new credit is just one of several factors in your score. The FCAC lists 'how often you apply for new credit' among the habits that influence it, alongside paying on time and how much of your available credit you use.

Where hard inquiries become a real problem is in clusters. Several credit applications in a short period can suggest to a lender that you're under financial stress or taking on a lot of new debt quickly. That's why applying for several credit cards at once, or applying again right after being declined, tends to backfire. If you've just been turned down, see what to do after a credit card application is denied before you try again.

How long hard inquiries stay on your report

The two bureaus keep inquiries for different lengths of time. According to the FCAC, credit inquiries by lenders stay on your report for 3 years with Equifax or 6 years with TransUnion. Equifax states that hard inquiries are automatically removed from its reports after three years.

Staying on your report isn't the same as hurting your score for that whole period. The effect of an inquiry on your score typically fades well before it disappears from your file. Still, it's worth knowing that a lender reviewing your TransUnion report may see older inquiries than one reviewing your Equifax report. Our guide to Equifax vs TransUnion explains why your reports and scores can differ between the two.

Rate shopping: how multiple inquiries are treated

Comparing offers is smart, and the scoring system makes some allowance for it. Equifax explains that for some loans, such as mortgages, multiple inquiries for the same purpose made within a set period are generally counted as one inquiry. That window depends on the credit scoring model being used, and Equifax gives a range of up to 45 days.

There's an important exception: Equifax says this treatment doesn't apply to credit cards. Each credit card application is generally treated as its own inquiry, even if you submit several on the same day.

To shop for a mortgage or car loan with the least impact:

• Get your quotes within a short, defined period, ideally a couple of weeks, rather than spreading them over months.
• Consider a mortgage broker, who can compare several lenders, though a broker will still need your consent to pull your credit.
• Ask each lender whether their initial quote requires a hard check, or whether they can give you an estimate first.

Planning applications around a big purchase

The time hard inquiries matter most is in the run-up to a major loan. If you expect to apply for a mortgage in the next several months, it's usually wise to hold off on new credit cards, store cards or financing offers. Each one adds an inquiry, and a new account can also change your available credit and the average age of your accounts, which lenders look at too.

Think about sequence. If you need both a car loan and a mortgage in the same year, give some thought to which comes first, and tell your mortgage lender or broker about any recent or planned applications so nothing on your report comes as a surprise. If you've recently applied for several cards to collect welcome bonuses, expect a mortgage lender to notice the cluster of inquiries and new accounts.

After the big loan closes, you can return to normal habits. Keep in mind that every new account is another payment to manage, and our guide on how many credit cards you should have can help you decide whether another application is worth it.

When you see an inquiry you don't recognize

An unfamiliar hard inquiry can be a sign that someone has applied for credit in your name. Review your Equifax and TransUnion reports, and if you spot an inquiry you didn't authorize, contact the lender listed and file a dispute with the bureau that shows it. Each bureau has its own dispute process.

If you suspect identity theft, act quickly: contact the bureaus about adding a fraud alert to your file, notify your bank and card issuers, and report it to police and the Canadian Anti-Fraud Centre. Our guide on disputing a credit report error walks through the process step by step.

Smart habits before you apply for credit

• Check your own reports first. It's a soft inquiry, and it lets you fix errors before a lender sees them.
• Apply only for credit you need and are likely to qualify for, rather than applying widely and hoping.
• Space out credit card applications, especially in the months before a major loan like a mortgage.
• Bunch loan shopping into a short window, and remember the rate-shopping allowance doesn't extend to credit cards.
• Ask whether a check is hard or soft before you consent to it.

A hard inquiry is a small, temporary factor compared with paying on time and keeping balances low. Manage those well and the occasional application won't hold you back.

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