There are many chequing accounts to choose from in Canada. But will opening one affect your credit score?
In this guide, we’ll answer that question and look at other factors that affect your credit score in Canada.
Key Takeaways
- Opening a chequing account does not usually affect your credit score.
- In some cases, the bank may make a hard credit check, which can have a temporary negative impact on your score.
- Many other factors have a bigger impact on your credit score, from having a high utilization ratio to making late payments.
Does Opening a Chequing Account Affect Your Credit Score?
In most cases, opening a chequing account in Canada does not affect your credit score.
Most banks will carry out a soft credit check when you open an account, and they do this to verify your identity. Soft inquiries do not impact your credit score.
Sometimes, a bank may carry out a hard credit check, especially if you request overdraft protection. Hard inquiries can have a minor and temporary impact on your score.
If you are unsure, ask your bank what type of check they will carry out before you apply to open the account.
Factors that Affect Your Credit Score
There are several factors that have a large impact on your credit score:
Utilization Ratio
Your utilization ratio is the amount of your total available credit that you use.
If you have access to $10,000 in credit across a personal loan and two credit cards and only use $2,000 of it, your credit utilization is 20%.
Ideally, you should keep your utilization ratio to 30% or less.
Payment History
Missing payments on loans and credit cards can greatly impact your credit score.
If missed payments lead to more serious problems, like your debt being transferred to a collection agency, this can impact your score even further.
Public Reports
If you are declared bankrupt or insolvent, this can have a negative impact on your score for years.
Credit Diversity
It’s usually better to have a good mix of credit accounts.
Having a mix of accounts, like credit cards, personal loans, mortgages, etc., can have a positive impact on your credit score.
Age of Accounts
It can often be good for your credit score if you have credit accounts with longer histories.
Newer accounts can lower the average account age, so it may be worth keeping old accounts like credit cards open.
Applying for Credit
When you apply for credit and the lender carries out a hard inquiry, this can have a small impact on your score.
As such, it’s a good idea to avoid making numerous applications for credit over a short period.
FAQs
Most banks run a soft inquiry, but some may run a hard inquiry if you request overdraft protection.
No, you build a credit score over many years based on various factors.
Being declared bankrupt will have a big impact on your credit score, but a history of failing to make your payments on time can also have a negative impact.
You can have as many accounts as you want, but most people choose to have a small number of accounts for convenience.
