Do credit inquiries hurt your credit score?


General financial advice recommends monitoring your credit report regularly. Canada’s two consumer credit reporting agencies, Equifax and TransUnion, will each provide your credit report for free once a year. But those requests are considered additional to routine checks done by anyone else you give permission to: prospective landlords, employers, money lenders, cell phone companies. General advice also warns that too many credit inquiries in a short period of time can actually hurt your score.

So, what is the truth? When a lender or an individual makes an inquiry into your credit history, it shows up on your report and may lower your score by multiple points. But not all credit inquiries will lower your score. Here are some tips we uncovered for making sure that your credit score isn’t suffering due to inquiries.

There are different kinds of credit inquiries: hard and soft

The Financial Consumer Agency of Canada differentiates between a “hard hit” credit check and a “soft” one. Hard hits are new checks and can include checks by prospective employers, landlords and credit card companies. Soft hits are requests you make or when a financial institution or lender you already have a relationship with asks for updated information.

While a hard hit appears on your report and lowers your credit score by a few points – soft hits are visible only to you and will not lower your score. Keep hard hit credit inquiries to a minimum.

Don’t apply for credit you don’t need

Frequently applying for credit from a variety of different money lenders leads to more of those hard hits showing up on your report. These days, more and more situations require a credit check, from signing a new phone contract to applying for a new job. So be smart about how often you apply for credit or allow lenders to check your score. Should you really open a department store credit card just to get that one-time discount? Probably not.

Don’t apply for credit from too many lenders at once

Credit inquiries can stay on your report for a minimum of three years. Equifax’s website also notes that “a flurry of inquiries will prompt most lenders to ask you why” there are so many, so it’s a good idea to keep the inquiries to a minimum.

But if you’re shopping around to get a loan such as a mortgage or a car loan, it’s okay to have all your prospective lenders check your credit. As long as these multiple hard checks are done in a period of several weeks, credit bureaus will treat this as one inquiry, because they know people often shop around for the best rates.

Monitor your report for mistakes

It’s good practice to check your credit report once, or even twice a year, by staggering free annual reports from both Equifax and TransUnion. If you spot a mistake on your report, it’s your responsibility to report it right away. You can also keep tabs on any suspicious activity that could be fraudulent.



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