What Is A Credit Inquiry?

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”. Want to know what a credit inquiry is and how it can affect your credit report and credit scores? Keep reading to find out. 

What Is A Credit Inquiry?

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 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.

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 may negatively affect your credit scores.  Do note, that a lender or creditor must ask your permission to legally conduct a hard credit check. 

Soft Inquiry

Landlords, employers, and certain businesses will occasionally examine your credit report as well as a background check. These typically are soft credit pulls and will not affect your credit scores. When you check your own credit, it is also considered a soft inquiry. Soft inquiries will be visible to you when you check your credit report, but not to lenders who check. Soft inquiries do not affect your credit scores.

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)
• Proving you with insurance (insurance providers)

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 may 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 credit scores, which normally range from 300 to 900 (although there may be multiple versions of your score).

How Much Weight Do Credit Inquiries Carry When Calculating Credit Scores?

While there are many different credit scoring models, credit inquiries typically make up 10%  of your total credit scores. Generally, the number of hard inquiries you have on your credit report goes into the calculation of your credit scores. The more hard inquiries you have within a short period of time, the riskier you’ll seem to future lenders. 

What Else Can Affect The Calculation Of Your Credit Scores? 

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

• Payment History ~35%
• Current Debts ~30%
• Credit History ~ 15%
• Public Records ~ 10% 

Additional Reading

Does Switching Credit Cards Affect Your Credit Scores?

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What To Do If You Have A Zero Credit Score?

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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 there is a hard pull of your credit report your credit scores may be negatively affected. 

Moreover, 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.

What Are 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 purposes

A non-credit-related inquiry is also referred to as a soft inquiry or soft pull. This is because your credit scores will not be affected. Unlike a hard inquiry, soft inquiries do not require your consent before an organization can perform a soft pull of your credit report.

What Are 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-approvals)
• Pre-approve you for another service

Account review inquiries do not affect your credit scores 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?

	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?

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 is 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, there are a few ways to better manage your hard credit inquiries, for example:

• Don’t Apply 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, it’s best if you space out your applications. Do note, that multiple credit inquiries within a short period of time for certain credit products (ex: mortgages) may be counted as a single hard inquiry.
• Limit How Many Credit Products You Apply For – If you want to reduce the damage that hard inquiries may do to your credit scores, one of the simplest solutions is to limit the number 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?

Unfortunately, if you don’t recognize a credit inquiry on your credit report, it 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 in order to correct the information. 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 another 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 which may improve your credit.

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 stop your identity from being stolen, lenders can see the alert 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. 

Bottom Line 

There are two types of credit inquiries, a soft inquiry and a hard inquiry. While a hard inquiry may affect the calculation of your credit scores, a soft inquiry won’t. Keep in mind that if any company, lender, creditor, insurance provider, etc. wants to check your credit, they will need to ask for permission first.