What Is A Credit Inquiry?

What Is A Credit Inquiry?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated April 14, 2022

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% 

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?

CostCredit ScoreCredit AlertsLink
FreeYesYesVisit Site
Free*
(with credit monitoring)
YesYesVisit Site
FreeYesNoVisit Site
FreeYesNo-

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. 

Frequently Asked Questions

How long does a credit inquiry stay on your credit report?

As mentioned earlier, a hard inquiry can remain listed on your credit report for up to 6 years with TransUnion and up to 3 years with Equifax (following the date it was made). 

Can my lenders see the soft inquiries on my credit report? 

Potential lenders cannot view your soft inquiries when you apply for new credit. Only you can see them when looking at your own report.

Why do lenders check credit?

There are a few different reasons a prospective creditor will examine your credit report and perform a hard inquiry. Generally speaking, they do this to get a basic idea of your creditworthiness, meaning the likelihood that you’ll make your payments on time.  

Can my landlord check my credit?

Yes, landlords can ask to check your credit to help them determine the likelihood that you’ll pay your rent on time each month. You will need to give your landlord permission to check your credit.

If I check my credit, will it hurt my credit score?

No, checking your own credit either via a credit bureau or through a third-party provider will not hurt your credit. 

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. 

Credit Glossary

Terms
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.

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.

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.

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.


Rating of 5/5 based on 6 votes.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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