Your credit scores are an important factor when it comes to accessing different credit products such as credit cards, personal loans, car loans and mortgages. Your credit health can not only affect your ability to secure a loan but the interest rates you’re charged. In fact, your credit can also affect your insurance rates, ability to rent an apartment and even secure a job you want.
Understanding who can check your credit and why can help you better manage your credit and finances.
What Is A Credit Check?
A credit check occurs when an organization or an individual requests access to a consumer’s credit report from a credit bureau. The main goal of a credit check is to assess a consumer’s creditworthiness during an application process.
There are two different kinds of credit checks in Canada, a hard pull, and a soft pull.
Hard Pull
Hard pulls (or hard credit checks) are typically performed by lenders and creditors you’ve applied with. In order to do a hard credit check, lenders and creditors must get your permission. Lenders will use your credit information to assess your creditworthiness.
Do note, that hard credit checks can negatively impact your credit scores, however, a single inquiry usually has a small impact and typically fades after a short period. On the other hand, several hard inquiries within a short period of time could cause a more severe negative impact. It’s best to keep your credit application at a minimum as lower credit scores could impact your ability to get approved in the future.
Pro Tip – Multiple hard inquiries within a specific amount of time (~7 – 45 days) on certain credit products like mortgages and car loans are counted as a single inquiry. This exception allows borrowers to apply with multiple lenders and compare offers.
Soft Pull
Soft pulls (or soft credit checks) happens when you check your own credit report. Soft credit checks also happen when a company or organization, who has a non-credit relationship with you, checks your credit report. A soft pull has no effect on your credit scores, so you can check your credit as often as you want.
A non-credit relationship includes but is not limited to:
- For identity verification purposes
- A potential employer
- A landlord
- Insurance companies
- For fraud detection purposed
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Who Can Check Your Credit In Canada?
The two credit bureaus in Canada (Equifax and TransUnion), create a file for every Canadian who has or is currently using credit products that are reported to that specific bureau. Keep in mind that not all lenders or creditors report to both bureaus, so your Equifax credit score may be different than your TransUnion credit score.
The following people or organizations are legally allowed to check your credit (with your permission):
You
You can check your credit at any point during the year and as many times you like without fear of hurting your credit. If you’re interested in getting a copy of your credit report to verify the information or to simply maintain a healthy financial life, your can do so with either credit bureau for free.
A Credit Card Company
When you apply for a new credit card you should expect to undergo a credit check as the credit card company will want to assess your creditworthiness. Most credit cards will have a minimum credit requirement, so be sure you meet that before applying.
A Lender
Most lenders will pull your credit before they approve you for a loan. But, keep in mind that there are a variety of alternative lenders who do not check credit as a part of their approval process. So, if you feel as though your credit is going to impede your ability to get approved for the loan you want, consider doing some research on no credit check lenders.
A Bank
When you apply for any type of loan or credit product with a bank (mortgages, second mortgages, lines of credit, personal loans, and business loans, etc.), they usually will always check your credit. Banks use a variety of methods to assess your creditworthiness, but often your credit report and scores are given a lot of weight during the approval process.
A Landlord
Whether you’re moving out on your own for the first time or simply looking for a change in location, your new landlord may require a credit check as part of the application process. Your landlord will be looking for a healthy credit history that paints a picture of a financially responsible individual who always makes their payments on time and does not have a serious debt problem.
Learn more about why landlords pull credit.
A Potential Employer
Something that many Canadian consumers do not know is that a potential employer may want to check your credit before they give you a job. While this isn’t common practice at all companies, depending on the job you’re interested in, a healthy credit history could be an asset that solidifies you as the best candidate.
Additional Reading
Who Can’t Check Your Credit?
Credit checks are meant for those who have, or are interested in entering, some form of financial relationship with you. But, this doesn’t mean that just any company can perform a hard pull of your credit. Any company or organization that wants to pull your credit must first get your permission.
This means that you always have a choice when it comes to who can see your credit. Just keep in mind that if you refuse a credit check, you may not get approved for the loan, credit product, or apartment that you applied for.
Credit Check FAQs
Do I need to provide my SIN number for a credit check?
Can lenders see soft credit checks?
Can a credit check hurt my credit scores?
Bottom Line
Given how important your credit is in your financial life, it’s crucial that you keep tabs on it. Maintaining good credit will help you attain the credit products you need at the rates you want. Be sure to check your credit before applying with any lender or creditor to see how you stand. You can access your credit report for free with both credit bureaus in Canada.
Glossary
| TERM | DEFINITION |
|---|---|
| Business Credit Report | A detailed report that is meant to provide potential lenders with information to allow them to determine the business’ creditworthiness before extending credit. There is much more information in a business credit report when compared to an individual’s credit report. Business credit reports are generated and regulated by the credit bureau. |
| Business Credit Score | A number that represents a business’ creditworthiness based on information within the credit report. The credit bureau calculates and regulates business credit scores. |
| Consumer Reporting Act | A governing body that oversees credit reporting agencies to ensure that personal information is collected, maintained and reported in a responsible fashion. The Consumer Reporting Act also ensures that individuals have the right to know what information is being reported in relation to them and who the information is being reported to. If any of the reported information is incorrect, you have the right to have it corrected under this act. |
| Credit | The extension of money, goods or services with trust that the individual will repay the owed amount in the future. In today’s world, trust of repayment is determined through an assessment of creditworthiness using a credit application. |
| Credit Application | A formal application, required by the majority of lending institutions, that gathers information from the applicant for the assessment of creditworthiness. The form will request information such as personal identification, income and expenses, residency, existing debt, and employment. |
| Credit Bureau | A governing body that collects credit information about individuals and sells it to other entities that are in the business of extending credit for a fee. Credit bureaus are also referred to as consumer reporting agencies and credit reporting agencies. In Canada, there are two credit bureaus, TransUnion and Equifax. |
| Credit Card | A financial product that allows cardholders to purchase goods and services using credit. The amount spent in a particular period becomes due at a specific date. If the amount is not paid on that date, interest will come into effect. Credit cards are a physical, plastic card. |
| Credit Limit | When a creditor extends credit to a consumer it comes with a credit limit, this is the maximum amount the consumer can borrow. |
| Credit Rating | Credit bureaus collect information about your personal finances and rate you to give potential lenders an easy way to assess your creditworthiness at first glance. There is a rating system in place for consistency and to protect from bias. Credit ratings are different from credit scores but are often used interchangeably. Your credit score actually determines what credit rating you’re given. As an example, if you have a credit score of 850, you’d be given a credit rating of “excellent”. |
| Credit Repair | The act of improving your credit score by removing inaccurate information from your credit report and working on healthy, responsible financial habits. |
| Credit Report | A credit report contains information regarding your credit history and includes things such as your credit score, payment history, financial debts, record of debt payment, and any black marks on your credit. Credit reports can be obtained from credit bureaus, such as Equifax and TransUnion. |
| Credit Score | A three-digit number that is calculated by credit bureaus using a mathematical rating system and information from your credit report. A credit score falls anywhere between 300 and 900, with 900 being the absolute best. Lenders might have minimum credit score requirements for extending credit which is why it’s important to maintain a healthy credit score. |
| Credit Union/Caisses Populaires | A type of bank that is owned by its members and operates for the benefit of their members. Credit unions are subject to provincial regulation and tend to be small in size and community-oriented. Because of these features, credit unions tend to be a superior way of investing, banking and lending. Credit unions are referred to as Caisses Populaires in Quebec. |
| Creditworthiness | By assessing the historical information associated with a consumers’ finances, creditworthiness is the amount of trust a lender places on a borrower in relation to the repayment of extended credit. Creditworthiness is assessed using a combination of credit report, credit score, credit rating and application information. |
| TERM | DEFINITION |
|---|---|
| FICO Score | A credit score created by the Fair Isaac Corporation. FICO scores are used by lenders to determine a borrower’s creditworthiness before extending credit. Scores range between 300 to 900. |
| TERM | DEFINITION |
|---|---|
| Inquiry | Whenever an entity, including yourself, requests a copy of your credit report, an inquiry is recorded. A hard inquiry is a request from a lender or any other individual that is assessing your creditworthiness. A soft inquiry is a request by you to view your own credit report. A large number of hard inquiries can indicate financial struggles to a potential lender. |
| Introductory Rate | A special promotional interest rate offered by credit card issuers for a specific period of time, such as a few months to a year. The goal with these rates is to attract new customers. |
| TERM | DEFINITION |
|---|---|
| Revolving Credit | A type of credit agreement that allows customers to borrow against a pre-approved credit line when making purchases. A credit card is the most popular form of revolving credit. The borrower is responsible for paying the borrowed amount plus interest each payment period. Revolving credit is also referred to as open-ended credit or charge account. |
