What is a Credit Inquiry?

Once you start using credit products, your providers will send your payment and account information to Canada’s major credit bureaus; Equifax and TransUnion. Soon after, each bureau will create a slightly different version of your credit report and credit score, both of which can be used to summarize your behaviours as a credit user. 

What is a Credit Inquiry?

All that said, there are a couple of other credit-related terms that you might not know, such as “credit inquiry”. Want to know what a credit inquiry is and how it can affect your credit report and credit score? Keep reading to find out.

A credit inquiry is when you or an organization requests access to the information included in your credit report. You can request a copy of your own credit report at any time (you have access to one free copy a year, you’ll have to pay a fee for any additional copies) to help keep track of your credit history and help manage any financial issues you may be experiencing (is it better to have no credit history or bad credit history? Click here). An organization can request a copy of your credit report to help them make decisions about you and your creditworthiness.

Types of Credit Inquiries

In Canada, there are several entities that can check your credit. When that happens, two types of credit inquiries could appear on your credit report:

• Hard Inquiry – If you apply for some kind of 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 can decrease your credit score slightly.  
• Soft Inquiry – Non-credit entities, like landlords, employers, and certain businesses will occasionally examine your credit report as well. You can also check your own credit. All these lead to soft inquiries, which will be visible to you when you check your credit report, but not lenders who check. Soft inquiries do not affect your credit score.

Learn more about hard and soft credit inquiries.

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, lender, creditors)
• Hiring you (any employer)
• Renting an apartment or house to you (a landlord or building manager)
• Proving you with insurance (insurance providers)

Learn how to read your credit report here.  

How do Credit Inquiries Affect Your Credit?

Be careful when applying for any product, service or job position that could appear on your credit report. This is a particularly important rule when it comes to hard credit inquiries, which have a direct impact on the overall health of your credit. 

In fact, new credit inquiries are one of the five top factors that can influence your three-digit credit score, which normally ranges from 300 to 900 (although there may be multiple versions of your score held by both Equifax and TransUnion).

What Percentage of Your Credit Score do Credit Inquiries Make up?

Basically, the number of inquiries you have on your credit report goes into the calculation of your credit score. When factored in, new credit inquiries make up about 10% of your total score. They also stay on your credit report for several years. Remember, only hard inquiries affect your credit score in a negative way.

Here are the other factors that go into the calculation of your credit score:

• Payment History = 35%
• Current Debts = 30%
• Credit Account Length = 15%
• Types of Accounts = 10% 

Found an error on your credit report? Learn how to dispute an error on your credit report. 

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 there is a hard pull of your credit report your credit score will go down a few points. Too many hard inquiries all within a short amount of time could negatively affect your credit score. Every time there is a credit-related inquiry made it will appear on your credit report and stay there for 3 to 6 years, depending on the credit bureau.

Non-Credit Related Inquiries

A non-credit related inquiry is performed by you when you request a copy of your credit report, and by other organizations that are looking to enter into a non-credit relationship with you. This includes but is not limited to:

• An organization that needs to verify your identity
• A potential employer
• A landlord
• An insurance provider
• For fraud detection purposed

A non-credit related inquiry is also referred to as a soft inquiry or soft pull. This is because your credit score will not be affected. Typically you’ll need to give your consent before an organization can perform a soft pull of your credit report unless it’s authorized by law.

How Long Does Credit Information Stay on Your Credit Report? Read this.

Account Review Inquiries

An account review inquiry can be performed by organizations that already have an established relationship with you. This type of inquiry can help an organization:

• With account renewals
• To change pre-existing limits
• Pre-approve you for another service

Account review inquiries do not affect your credit score and will only be visible to you on your credit report, no other organization who pulls your credit report will see these inquiries.

Interested in Checking Your Credit?

	Cost	Credit Score	Credit Alerts	Link
	Free	Yes	Yes	Visit Site
	Free* (with credit monitoring)	Yes	Yes	Visit Site
	Free	Yes	No	Visit Site
	Free	Yes	No	-

How Often Should You Check Your Credit Report?

Since all Canadians can request one free credit report a year from each credit reporting bureaus, once a year is a good place to start (learn how to get your credit report for free here). For the average consumer, reviewing your credit report once a year should help you keep track of your accounts and make sure that there aren’t any issues. For anyone looking to make serious financial changes or who are currently experiencing financial problems, it may be in your best interest to check your credit report every 6 months.

Steps You Can Take to Manage Your Hard Inquiries 

Although a hard inquiry can have a negative impact on your credit report, the final effect is relatively small, at least until you apply for new credit multiple times. There are a few ways to better manage your hard credit inquiries, for example:

• Apply Within a Short Timeframe – It’s not always a great idea to apply for too much new credit. However, if you really need to, it’s best if you don’t space out your applications too much. Actually, if you apply multiple times within a short window, a credit bureau may count them as a single hard inquiry.

• Limit How Many Credit Products You Apply For – If you want to reduce the damage that hard inquiries can do to your credit score, one of the simplest solutions is to limit the amount of times you apply for credit in the first place. Do lots of research beforehand and only apply for credit products that you truly need.

• 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 both versions of your report 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?

It’s never a bad idea to check your credit report, which you can do for free once per year with either credit bureau (other copies may cost a fee). Be sure to look the whole document over carefully, as you may end up spotting a suspicious credit inquiry for a product that you don’t remember applying for. 

Unfortunately, this could be a sign that you’ve been scammed or had your identity stolen. Not only could this result in hard inquiries that you didn’t deserve, it means your finances may be compromised. Here’s a list of the preventative measures you should take if you don’t recognize a credit inquiry on your report:

Get in Touch With 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 mail a letter to the credit bureau(s) on your behalf. If the dispute is viable, the bureau will remove the record from your report.

Learn more about why you should monitor your credit.

Send a Letter to The Credit Bureau(s)             

If you discover a fraudulent credit inquiry or other kind of suspicious activity on your credit report, you can always send your own letter to Equifax and/or TransUnion. Once the bureau determines that the dispute is legitimate, they will remove the record from your report and you should gradually see your credit improve.

Check out these credit monitoring services in Canada.

Get a Fraud Alert Added to Your Credit Report

Fraud alerts are a free service offered by both credit bureaus. While they don’t protect you against scamming or fraud, lenders can see them when checking your credit report. Essentially, a fraud alert tells them that your finances may be compromised, so they should go the extra mile to confirm your identity. Plus, it won’t affect your credit score. 

Ask the Bureau(s) to Put a Credit Freeze on Your Report

Credit freezes are another free service that doesn’t affect your credit score. Like a fraud alert, freezing your credit doesn’t totally fix the damage from fraud. However, it prevents unrecognized parties from opening credit accounts using your identity. After you’ve had a chance to recover financially, ask for the freeze to be temporarily lifted or removed.

Check out who can freeze your bank account in Canada.

Worried About Credit Inquiries Affecting Your Credit Score?

If you’re having trouble managing your hard credit inquiries or you’re trying to reverse the negative impact caused by identity fraud, stay calm and follow the preventive measures above. While it might take a bit of time to fix the situation completely, it’s always possible to bounce back from credit score damage if you have the right help!