What’s The Difference Between Hard And Soft Credit Inquiries?

A credit inquiry is when a lender, financial institution, creditor, or other individual requests to view your credit report. There are two different types of credit inquiries: Hard and Soft. Hard inquiries can impact your credit score, while soft inquiries do not impact your credit score. Here’s a more detailed comparison of a hard vs soft credit inquiry:

• Hard credit inquiries are formal reviews of your credit report that happen happen when you apply for a credit product. Lenders take a deep dive into your credit history before approving your credit application. Hard inquiries can impact your credit score, so you should limit the number of hard inquiries that you authorize (especially in a short period) to avoid credit score drops.

• Soft credit inquiries are surface level credit score checks used to gauge your creditworthiness. These occur when you check your own credit score with Borrowell or when a lender checks your score to pre-approve you for special offers. Soft inquiries don’t impact your credit score.

Below, we’ll take a closer look at the difference between soft and hard credit inquiries to help you understand how they affect your credit rating, and how to use them to your advantage when shopping for credit cards, loans, and mortgages. 

What is a soft credit check?

So what exactly is a soft credit inquiry? It’s sometimes referred to as a soft pull or soft inquiry, and it typically happens when someone checks your credit report to gauge if you’ll be successful before applying for credit. A soft check also occurs when you check your free credit score using Borrowell, or when you download your Equifax credit report with Borrowell. This doesn’t affect your credit score, no matter how many times you check your credit score or pull your credit report.

Soft credit inquiries, when done by a financial institution or other company, only allow limited access to your credit report. They are meant to provide a high-level overview of your credit health.

Common examples of soft credit checks include:

• When a potential lender checks for pre-approved offers (i.e. line of credit, mortgage)

• Employer background checks

• Getting your free credit score from Borrowell

Whether you’re about to apply for a loan or are looking to improve your credit health, checking your credit score on a regular basis can help you make informed financial decisions.

Soft credit checks do not appear when lenders look at your report; they are only displayed to you. These checks don’t impact your credit score, so there’s no harm in performing frequent soft credit pulls and regularly checking your credit score to stay on top of your overall financial health. You can check your credit score in Canada for free with Borrowell without impacting your credit score.

What does a soft credit check show?

A soft credit check can show information like your number and type of credit accounts, late payments, any debt sent to collections, and hard credit inquiries. Only you can see what soft credit inquiries have been run on your credit report.

How long does a soft credit check stay on your credit report in Canada?

Soft credit inquiries may appear on your credit report but they are only visible to you so don’t affect your credit score.

What is a hard credit check? 

So what is a hard inquiry? A hard credit inquiry, sometimes referred to as a hard pull or hard check, happens when a potential lender checks your full credit report when making a decision on whether or not to approve your credit application. Lenders and other companies require your permission before making a hard credit inquiry. 

Hard credit checks provide lenders full access to your entire credit history. When a lender performs a hard inquiry, it can slightly lower your credit score, especially if lots of hard checks are made in a short space of time. This is because making multiple applications for credit can signal to lenders that you’re desperate for credit. This might make them concerned that you’ll struggle to pay back what they lend you.

How long do hard credit checks stay on your credit report?

Hard inquiries are listed on your credit report and, in Canada, will stay there for three years. Other lenders and companies can see how many hard inquiries are listed on your credit report when they pull your report.

Common examples of when hard credit checks occur include:

• Credit card applications

• Personal loan applications

• Car loan applications

• Mortgage applications

• Apartment rental application

• Cell phone contract

• Internet plan contract

Because these credit inquiries affect your score, it’s best to keep them to a minimum. Only authorize a few within a small time frame. This is especially true if you’re tackling a large financial goal, such as applying for a mortgage.

How much does a hard credit check affect your credit score in Canada?

The effect of one or two hard credit checks is likely to be small. You definitely want to avoid making too many applications for credit products in a short space of time, as it’s when multiple hard credit inquiries start to add up that they can have a bigger negative effect.

While hard credit checks can cause your credit score to dip, there are a few things you can do to limit the impact and maintain a healthy credit score.

Consider spreading out applications that trigger hard credit inquiries to one every few months. This can allow your credit score time to recover from the impact of the inquiry. 

Lenders who view your credit report may be concerned if there are too many hard credit inquiries listed on your credit report. It may look like you’re urgently applying for credit, or that you’re trying to live beyond your means by taking out too many credit products. Lenders might think that you’re stretching yourself too thin and that you might have trouble paying them back. 

When you’re attempting to build credit, you may find it tempting to open new accounts in quick succession, but doing so can actually be detrimental to your credit score in the short term. If you have a short credit history, multiple hard inquiries in a short time period are more damaging to your score than if you have an established history.

Your credit report gives you full access to review anyone that makes a hard pull. If you notice an inquiry you don’t recognize, contact the credit bureau to dispute the record and have it removed. Updating the information they have on file can help you improve your credit score. 

Can a hard credit check be removed from your credit report?

You can legally request that a credit bureau remove hard credit inquiries from your credit report if:

1. You did not apply for credit with the company that ran the hard inquiry

2. You did authorize the company to run a hard credit check on your report

If you have a hard credit inquiry on your credit report that you don’t recognize or that you did not authorize, you can dispute it with the credit bureaus. The two main credit bureaus in Canada are Equifax and TransUnion.

How do I minimize the effects of hard inquiries?

You can limit the impact of a hard credit check in a few different ways.

Spread out your loan applications

Firstly, it’s wise to spread out loan applications to give your score time to recover. Instead of applying for a series of loans in quick succession, be strategic about it. Carefully consider whether you need to borrow money and how applying for a loan will affect your overall financial health.

If you’re hoping to secure a large loan such as a mortgage or a line of credit in the near future, you may want to forgo applying for smaller loans for the time being. This will minimize the number of hard inquiries on your credit report, and your credit report will look more favourable to lenders.

Group credit inquiries by loan type

While applying for a series of loans in quick succession is typically a red flag, there is an exception if you are applying for the same type of loan. Credit bureaus will combine hard pulls made within a grace period for certain loan inquiries and count them as a single hard check.

For instance, if you apply for three different car loans, it signals to lenders that you’re shopping around for the best deal. These inquiries will all be counted as one inquiry, rather than three separate ones. However, if you apply for a car loan, a mortgage, and a new credit card all at once, each inquiry will be counted separately. 

The grace period to group these types of hard inquiries is usually 14 - 45 days. 

So, if you’re shopping for a new vehicle or a mortgage, it’s safe to authorize multiple hard inquiries with different lenders in order to shop around for the best loan available. Don’t try to buy a new car and a new house all at the same time.

Dispute hard inquiries you didn’t authorize

It’s wise to make a habit of reviewing your credit report regularly. This way, you are able to catch errors and dispute them in a timely manner. If you happen to spot a credit inquiry you didn’t authorize, you can contact your credit bureau and request that it be removed from your report.

Use Borrowell to view your credit score and credit report for free. Doing so won’t affect your credit score and it will enable you to quickly spot any changes or discrepancies you may need to dispute. Regularly review your credit report and ensure you don’t notice any odd entries, errors, or information on your report.

What should I do if I don't recognize a hard inquiry on my credit report?

It’s essential that you check your credit report regularly so you can spot any discrepancies as soon as possible. If you wait too long to review your credit report you may have a hard time remembering which inquiries you did or didn’t authorize. 

With Borrowell, it’s free to monitor your credit report, so there’s no reason not to, especially if it can help you remove needless derogatory marks against your score. 

If you happen to spot an inquiry on your credit report that you didn’t authorize, you can dispute it. 

To do so, you will need to contact each credit bureau separately (Equifax and TransUnion) and follow their protocols for reporting errors on your report. Typically, you can complete this process online or through mail, and there is no charge to do this. 

The item in question can only be removed from your credit report if it is deemed inaccurate. Items that are accurate will not be removed, even if you dispute them.

In most cases, you will be asked to provide documentation to support your claim. For instance, if you have been a victim of identity theft, providing proof of this will add weight to your dispute. 

The Bottom Line

Now that you know the difference between soft and hard credit inquiries, don’t stress out about avoiding all hard inquiries. Keeping hard inquiries in check can contribute to your financial well-being and improve the chances of qualifying for a loan with better rates when you need it.

Checking your credit report regularly will help you see how your financial activities have affected your score, for better or for worse, and enable you to spot any errors before they turn into a bigger problem. We recommend that you check your credit report monthly to make sure there aren't any errors or signs of fraud on your report.

Get your free credit score and free credit report from Borrowell! It’s a soft inquiry that won’t affect your credit score.