How Applying For New Credit Affects Your Credit Scores

How Applying For New Credit Affects Your Credit Scores

Written by Shari Talbot
Fact-checked by Caitlin Wood
Last Updated March 25, 2022

If you are applying for a mortgage or other credit products, lenders look at your credit to determine your creditworthiness. Employers, potential landlords, and insurance companies also have the right to pull your credit report with your permission, before approving your application. 

Problem is, when these entities pull your credit report it can affect your credit scores depending on the type of credit inquiry made. 

What Is A Credit Inquiry? 

A credit inquiry involves a lender, creditor or other third-party pulling your credit report to determine whether you’re creditworthy. It’s important to note that in order for any one of these parties to legally pull your credit report information, they must get your consent prior to conducting the credit check. 

Does Applying For New Credit Affect Your Credit Scores?

Each time you apply for a new credit account (including cellular phone plans), your lender or company will make a request to review your credit report. When that request is made, it is recorded on your credit report, either as a hard inquiry or a soft inquiry

Hard Inquiries

Hard pulls usually come from financial institutions where you have applied for a financial product or service and have given the company permission to see your file. A single inquiry may have a small effect on your credit scores. Usually, one hard pull isn’t a big deal but if you experience several hard pulls within a short period of time, you may experience a bigger problem. Your scores may be reduced significantly and lenders may worry that you are living beyond your means.

Soft Inquiries 

Soft pulls do not require your permission. Often, they come from sources, other than lenders, who are doing background checks. These might include potential employers, insurance brokers, and car rental companies. Credit card companies may also review your files when offering new cards or increased credit limits. Soft inquiries won’t be seen by most lenders and won’t affect your credit scores.

Will Your Credit Scores Be Affected If You Check Your Credit? 

When you request your own credit report and/or credit scores, it is considered a soft pull and will not affect your credit scores or your ability to be approved for a credit product in the future. Every time you check your credit,  it will appear on your credit report as a soft inquiry, but this information will only be visible to you and not your creditors. 

Multiple Credit Inquiries And Credit Scores

Hard inquiries on certain credit products like a mortgage or auto loan work differently than when you apply for a credit card or personal loan. With mortgages, multiple hard inquiries within a short period of time (usually14 to 45 days) are considered as a single inquiry. The exact time frame depends on the credit scoring model used by the lender calculating your credit scores. 

Do note, each hard inquiry made will show up on your credit report, however, the impact it has on your credit will be equal to a single Inquiry. This expectation allows borrowers to apply to various lenders to find the best mortgage or auto loan. 

Multiple Inquires For Other Credit Products

If you have multiple hard inquiries on your account for other credit products like a credit card or personal loan, this could cause your credit scores to fall. It can also cause lenders to think you are in financial trouble and might prevent you from getting the money you need. It is important to apply for new credit only when you need it.

What Are Credit Scores?

A credit score is a three-digit number used by companies (lenders, creditors, insurance providers, landlords) who wish to extend credit to you. Credit scores are one factor used during the application process to assess the likelihood that you’ll make your future payments on time.

  • Excellent (Scores 760+)
  • Very Good (Scores 759 – 725)
  • Good (Scores 724 – 660)
  • Fair (Scored 659 – 560) 
  • Poor (Scores 559 – 300) 

If you have a very low score, you’ve probably had some credit difficulties in the past, such as a delinquent account or bankruptcy, and you may have a tough time getting approved for new credit. Or, you may be a young adult or newcomer to Canada and are just starting to build your credit history. If you have a higher score, you have likely made all your payments on time and have a history of responsible credit usage. Lender may find you less of a risk to lend to.

Factors That Can Affect Your Credit Scores

The credit reporting bureaus keep records of all credit information reported to them. This includes, payments, credit inquiries, late payments, delinquent accounts, bankruptcies, and judgements, and compile your credit reports. Then your credit scores are calculated based on the information within your credit reports. There are five main factors taken into account when your credit scores are calculated.

Payment History (~35%) – Have many credit accounts do you have open? Have you always paid your accounts on time? Do you have any missed or past due payments in your history? Have you ever filed for bankruptcy or filed a consumer proposal? All of this information is used to calculate your credit scores.

Current Debts (~30%) – How much debt are you currently carrying? How much credit do you have available to you? And how high are your balances? Many credit score models take into consideration these factors especially when it comes to credit cards and other revolving credit.

Account History (~15%) – How old are your credit accounts? Do you have a mix of older and newer products in your file? Scoring models typically take into consideration how long both your oldest and newest accounts have been open. 

Public Records (~10%) Public records like accounts in collections, lawsuits, and bankruptcy are typically recorded on your credit reports and will affect the calculation of your credit scores.

Number of Inquiries (~10%) – How often are you applying for new products? When a lender or creditor pulls your credit as part of an application for new credit, a hard inquiry may be noted on your credit reports. This can affect the calculation of your credit score.

Will Opening A New Credit Card Hurt My Scores?

The short answer is, it could. Opening a new credit card could affect your credit scores in a number of ways:

  • Credit Inquiry – When you apply for a new credit card, your creditor will pull your credit report which will result in a hard inquiry. This, in turn, may negatively impact your credit. 
  • Credit Account Age – A new credit card account can lower the average age of your accounts, especially if you close an older account first. 
  • Debt-To-Credit Ratio – When you open a new credit card account, you’re available credit limit will increase which can reduce your overall debt-to-credit ratio, which may positively impact your credit. 

Credit Inquiry FAQs

Do credit inquiries show up on your credit report with both credit bureaus? 

There are two credit reporting bureaus in Canada, Equifax and TransUnion. Lenders may report to one or both bureaus regarding the credit activity. Credit inquiries are typically recorded with the credit bureau the lender requests a credit check from. 

How do I know if my lender is doing a soft or hard credit check?

In order for lenders to perform a hard credit check, they’ll require your permission. Lenders do not require your consent for soft inquiries. So if a lender asks for your permission to pull your credit, it’s usually a hard credit check. If you’re still unsure, simply ask your lender before applying. 

How long do hard inquiries stay on your credit report? 

Credit inquiries can stay on your credit report for up to 3 years with Equifax Canada and up to 6 years with TransUnion. 

Bottom Line

Don’t stress if too many credit inquiries have reduced your credit scores. This factor generally carries less weight than other factors when calculating your overall credit scores. Though credit inquiries may stay in your file 3-6 years, depending on the credit bureau, their impact on your credit scores lessens with time. To avoid credit inquiries affecting your credit, simply limit your credit applications to those that are essential.


Rating of 5/5 based on 8 votes.

Shari is a Freelance Writer, specializing in personal finance, business blog content and education. She enjoys taking complex information and putting it into a form the average consumer can understand. When she is not working, she homeschools her children, supports her husband in business, and enjoys traveling with her family.

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