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If You Apply For A Credit Card In Canada, Be Wary -- It Might Affect Your Credit Score

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There are several factors that a credit reporting agency takes into account when they calculate a consumer’s credit score. One of them is the number of times that someone has made an inquiry into a person’s credit score. Sounds like a catch-22, but it doesn’t have to be. Before you decide to sign up for a credit card, make sure that you really want and need it -- or you just might unwittingly be tanking your score and making money not just harder to borrow but more expensive, too.

The good news is that not all credit inquiries are equal. There are two different ways that someone can check your credit score when you apply for credit card in Winnipeg. They can do a “hard inquiry” or a “soft inquiry.” Although these are just a matter of semantics, the two have very different effects on your overall score. Both types involve a third agency, like a credit lender, viewing your credit report, but only the hard variety can have a negative effect on your score.

What are Hard Credit Inquiries?

A hard inquiry is typically done when a financial institution in Canada, such as a credit card company or a banking institution, checks your credit report and score so that they can decide whether they should take the risk of lending you money. The person who has a hard inquiry done is usually borrowing money, and the third party doing the inquiry has to have permission.

Hard inquiries can have a negative effect on your credit rating. Although it’s only a small amount -- a couple of points -- they last on your report for up to two years. But if you aren’t aware that they are messing with your score, allowing many institutions to do hard inquiries while you shop around for rates can become very problematic and end up costing you a whole lot. As time passes, hard inquiries do fade from your credit history, and so does the damage that they cause. But if you don’t have to have them, stay away from hard inquiries, or you are doing damage to your score trying to score a loan. That is where the catch-22 comes in.

What are Soft Credit Inquiries?

A soft inquiry is when someone is allowed to see your credit history as a function of checking your overall background and history. A soft inquiry is performed in Canada if you are trying to get pre-approved for a credit offer, for a background check for employment, or when you are trying to get a credit history for your own knowledge or records. Unlike hard inquiries, soft inquiries do not require that you provide the company or agency your permission to see your credit history.

The advantage is that a soft inquiry does not affect your credit score at all. Although they don’t affect your credit score, some agencies will make a record of them and some will not. That is only important if someone is looking at your full report and sees that you have made a lot of soft inquiries. Even if it doesn't show up on your score, those viewing the report will have the information that many people have been looking into your financial standing.

If you are worried about checking your credit score to see where you fall, whether it is for a loan or just because you are trying to clean up your credit for future borrowing, making a soft inquiry will not negatively affect your score. You are allowed to see your own credit score without penalty of any sort, and it is a really good idea to check frequently.

Why Do You Want To Check Your Credit Score and History?

Even if you aren’t in a position where you want to borrow money, checking your score periodically is very important to ensure that there isn’t any fraudulent activity going on. It can also ensure that someone isn’t using your information for identity fraud. Knowing where your credit stands is also an excellent way to try to boost it, just in case there comes a time when you do want to borrow money. Soft inquiries are necessary to keep your credit score safe; just be aware of the hard ones, as they can hurt, not help. Don't ever give someone permission to check your credit history or score without being absolutely positive that it is necessary.


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