Your credit report is a document that holds all of your credit-related information. It holds information about your credit accounts, payment history, and other credit-related terms that you might not know, such as a “credit inquiry”.
So, what is a credit inquiry, and how can it affect your credit score?
Key Points
- A credit inquiry occurs when a business or individual accesses your credit file.
- A hard inquiry can hurt your credit score, while a soft inquiry has no effect.
- For the most part, anyone who wants to pull your credit file will need your consent to do so.
What Is A Credit Inquiry?
A credit inquiry happens when an organization or individual requests access to your credit report. You can request a copy of your own credit report to help keep track of your credit history and help manage your credit. An organization can request a copy of your credit report to help them make decisions about you and your creditworthiness.
Who Can Pull My Credit Report?
There are both federal and provincial laws that govern who can legally request access to your credit report. This means that only you or organizations that you have a relationship with can see the information included in your credit report. In order to gain access to your credit report, an organization must be in the process of:
- Approving you for credit or a loan (banks, credit card companies, lenders)
- Trying to collect a debt (banks, lenders, creditors)
- Hiring you (any employer)
- Renting an apartment or house to you (a landlord or building manager)
- Providing you with insurance (insurance providers)
Anyone who wants to pull your credit report must obtain consent from you, as per the law.
Types Of Credit Inquiries
When a business or individual requests access to your credit file, two types of credit inquiries could appear on your report:
Hard Inquiries
If you apply for a loan or new credit product and a lender checks your credit report, a hard inquiry will appear on your credit history for a predetermined period. Since these transactions correspond to official credit applications, each hard inquiry performed may negatively affect your credit score. Do note that a lender or creditor must ask your permission to legally conduct a hard credit check.
Soft Inquiries
Certain businesses or people may want to look at your credit report, even if you don’t apply for credit. For instance, your credit file may be reviewed as part of a loan pre-approval process or background check. These typically are soft credit pulls and will not affect your credit score.
You can also check your own credit report, which would also be considered a soft inquiry. These inquiries will be visible to you when you check your credit report, but not to lenders who may check.
How Do Credit Inquiries Affect Your Credit?
Be careful when applying for any product, service, or lease that could appear on your credit report. This is particularly important when it comes to hard credit inquiries, which may have a direct impact on the overall health of your credit.
In fact, new credit inquiries are one of the top five factors that can influence your credit score, which ranges from 300 to 900 (although there may be multiple versions of your score).
How Much Weight Do Credit Inquiries Carry When Calculating Credit Score?
While there are different credit scoring models, credit inquiries typically make up roughly 10% of your credit score calculation. The number of hard inquiries you have on your credit report also goes into the calculation of your credit score. So, the more hard inquiries you have within a short period of time, the more severe the impact on your credit score.
What Other Factors Can Affect The Calculation Of Your Credit Score?
Other important components of your credit score calculation include the following:
- Payment History (~35%) — Whether your bill payments are on time or late/missed plays the most important role in the calculation of your credit score. While timely payments can improve your score, late or missed payments can pull your score down.
- Credit Utilization (~30%) — The amount of credit you have available to you relative to how much credit you use, which is known as your ‘credit utilization ratio’, is also used to calculate your credit score.
- Length Of Credit History (~15%) — The average age of your credit accounts and the length of your credit history contributes roughly 15% of your credit score calculation. So, having older credit accounts, especially those in good standing, can be a good thing for your credit score.
- Public Records (~10%) — Negative remarks on your credit file, such as past bankruptcies, consumer proposals, or accounts in collections, can hurt your credit score.
What Information Does A Credit Report Show?
A credit report includes several details, including the following:
Identifying Information
Certain personal details are included for identifying purposes, such as:
- Your name
- Your address
- Your birthdate
- Your Social Insurance Number (SIN)
- Your employment information
Credit Accounts
The credit accounts you have open are typically found in your credit report. Details of each account include the following:
- Account type (ie. auto loans, personal loans, credit cards, etc)
- Date the account was opened
- Loan amount or credit limit
- History of timely or late/missed payments
- Account balance
Credit Checks
Hard credit inquiries are usually included in your credit report. Soft inquiries, on the other hand, are typically not visible to anyone other than yourself.
Negative Remarks
Public records, like bankruptcies, consumer proposals, or accounts in collections may be recorded on your file.
What Are Credit-Related Inquiries?
A credit-related inquiry is typically performed by an organization looking to extend credit to you or to provide you with a loan. These types of inquiries are called ‘hard inquiries’, sometimes referred to as ‘hard pulls’. This means that every time a hard credit inquiry is conducted, your credit score may be negatively affected.
Moreover, every time a credit-related inquiry is made, it will appear on your credit report and stay there for 3 to 6 years, depending on the credit bureau.
What Are Non-Credit Related Inquiries?
A non-credit-related inquiry is performed by organizations or individuals looking to enter into a non-credit relationship with you. This includes the following:
- An organization that needs to verify your identity
- A potential employer
- A landlord
- An insurance provider
A non-credit-related inquiry is also referred to as a ‘soft inquiry’ or ‘soft pull’. Unlike a hard inquiry, soft inquiries do not require your consent before an organization can perform a soft pull of your credit report. Soft inquiries also have no effect on your credit score.
What Are Account Review Inquiries?
An account review inquiry can be performed by your existing creditors that already have an established relationship with you. These creditors may conduct an account review periodically to determine whether you’re eligible for a credit limit increase or to pre-approve you for another product or service
Account review inquiries do not affect your credit score and will only be visible to you on your credit report. No other organization that pulls your credit report will see these inquiries.
Where Can You Check Your Credit?
You can check your credit score for free online with Equifax, which is one of the two major credit bureaus in Canada. If you live in Quebec, you can also check your TransUnion credit score for free online. If you live elsewhere, you’ll need to pay a small monthly subscription fee to access your credit score from TransUnion.
Alternatively, there are several online resources you can use for free to check your credit score:
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
How Often Should You Check Your Credit Report?
For the average consumer, reviewing your credit report once a year is a good idea to help you keep track of your accounts and make sure that there aren’t any issues. If you’re looking to make serious financial changes or are currently experiencing financial problems, it may be in your best interests to check your credit report more often, perhaps every 3-6 months.
Steps You Can Take To Manage Your Hard Inquiries
Although a hard inquiry can have a negative impact on your credit, there are a few ways to minimize their effect on your credit score:
- Don’t apply for too many accounts within a short timeframe. It’s not a good idea to apply for too many new credit products, especially within a short time frame. However, if you really need to apply for more than one, try to space out your applications. Do note, however, that multiple credit inquiries within a short period of time for certain credit products, like mortgages, may be counted as a single hard inquiry.
- Limit the number of credit products you apply for. Be selective about the credit products you want to take out. Only apply for what you really read to minimize the negative impact on your credit score.
- Check your credit report regularly. It’s possible that a new credit inquiry was placed on your credit report by accident or as a result of identity fraud. So, it’s smart to check for mistakes or discrepancies at least once a year. If you find one, file a dispute claim with the credit bureau right away.
What If I Don’t Recognize A Credit Inquiry On My Report?
If you don’t recognize a credit inquiry when you pull your credit file, take immediate steps, which can include the following:
Speak To Your Lender
Your credit report should contain information about the lender that made the inquiry. Reach out to them immediately so that they can verify the account or product.
If the lender cannot prove its legitimacy, ask them to inquire with the credit bureau directly on your behalf to correct the information.
Send A Letter To The Credit Bureau
If you discover a fraudulent credit inquiry or another kind of suspicious activity on your credit report, have the credit bureau investigate it. If the bureau determines that your dispute is legitimate, they will remove the record from your report, which may improve your credit.
Set Up Fraud Alert To Your Credit Report
Fraud alerts are offered by credit bureaus. While they don’t stop your identity from being stolen, lenders can see the alert when checking your credit report. Essentially, a fraud alert tells your lender that your finances may be compromised, so they should take extra steps to confirm your identity.
Bottom Line
Depending on the type of inquiry made on your credit report and for what purpose, your credit score may or may not be affected. While hard inquiries may harm your credit score, soft inquiries won’t affect it. Keep in mind that if any company, lender, creditor, insurance provider, etc. wants to conduct a hard inquiry, they’ll need your permission first.
