Hard vs. Soft Credit Check: What’s The Difference?

A credit inquiry or credit check shows up on your credit report when you or someone else accesses it.

This credit check is called a “hard credit check” or “hard credit inquiry” if it involves an application for new credit such as a personal loan.

It is referred to as a “soft credit check” or “soft credit inquiry” if your credit file is being pulled for a background check or pre-approval for a credit offer.

Hard credit inquiries can negatively impact your credit score and you should limit them if you are trying to improve your credit score.

It also makes sense to monitor your credit report for unauthorized “hard pulls”. Read on to learn about hard and soft credit checks and their differences.

What is a Hard Credit Check?

When you apply for a new credit card, the credit card issuer will pull your credit file so they can access your creditworthiness.

They get this information from the credit bureaus i.e TransUnion and Equifax and require you to give consent for them to proceed with the credit inquiry.

A hard inquiry provides the lender with your detailed credit history, showing them how you have managed credit in the past, your payment history, the credit accounts you have opened, and more.

They can also see other hard inquiries or credit checks on your credit report which tells the lender whether you have recently taken on a significant amount of debt.

Hard credit checks stay on your credit report for 36 months (3 years) and they can impact your credit score.

Some examples of when a hard credit check may occur include:

  • Mortgage application
  • Credit card application
  • Personal loan application
  • Line of credit application
  • Apartment rental application
  • Cell phone contract application

What is a Soft Credit Check?

When you check your own credit score directly on Equifax or TransUnion, or through a free service like Borrowell, it is recorded as a soft credit check or ‘soft pull”.

If an employer or landlord conducts a background check, this also qualifies as a soft credit check.

Soft credit checks do not affect your credit score and may or may not be listed on your credit report.

Inquiries that qualify as a soft credit check:

  • Credit limit increases on existing credit cards
  • Employer-conducted background check
  • Pre-approval for loan or credit card offers
  • When you check your credit score using a credit monitoring service
  • When you get an insurance quote
Hard vs. Soft Credit Check - What’s The Difference

Hard vs. Soft Credit Check in Canada and Impact on Your Credit Score

You can always pull your credit report and check your score without negatively affecting your credit rating.

If you are applying for new credit, however, you want to be careful about potentially lowering your score.

For example, if you apply for a credit card, the lender checks your credit, and a hard inquiry occurs. This can lower your credit score by a few points for some months and it should not cause longstanding damage.

That said, if you have multiple hard inquiries on your file within a short period of time, lenders may become wary about extending credit to you. Or they could increase your borrowing rates to account for increased risk.

If you are shopping for a mortgage loan or car loan, all the hard inquiries over a period of time (14-45 days) may be counted as one inquiry, limiting the impact on your score.

Overall, hard credit inquiries in Canada only stay on your credit report for 3 years.

Free Soft Credit Check in Canada

Instead of paying a credit bureau to access your credit score, you can use a credit monitoring service that provides it for free.

Examples of free credit check services in Canada include:

  • Borrowell
  • Credit Karma
  • Mogo Canada

Free Equifax Soft Credit Check

Equifax Canada provides access to your credit score for free when it has its promotional offers. Alternatively, you can access it via Borrowell.

Borrowell is a financial technology company that has been providing Canadians with free credit score checks since 2016. Sign up here to get your score within 3 minutes.

The company provides a credit score based on the Equifax Risk Score 2.0 model and it is updated weekly. You also get your credit report.

Free TransUnion Soft Credit Check

The second main credit bureau in Canada is TransUnion.

TransUnion provides access to your credit score via a subscription-based credit monitoring service that costs $24.95 per month.

That said, you can also get it for free using Credit Karma.

Hard and Soft Checks FAQs

How many hard inquiries are too many?

There is no specific number of hard inquiries you should avoid. Typically, a hard inquiry only lowers your credit score by a few points, and it should bounce back after a while. That said, multiple hard inquiries within a short period can make lenders reluctant to approve your loan application.

How many points does a hard inquiry drop your credit score?

From my experience, a hard inquiry from a lender can lower your credit score by up to 10 points. Inquiries make up 10% of the factors used in calculating your score.

How long does a hard inquiry affect your credit score?

Hard inquiries usually affect your credit score for up to one year. That said, lenders can still see them for up to 3 years on your Equifax credit report and up to 6 years on your TransUnion credit report.

Do lenders look at hard inquiries?

Yes, lenders look at hard inquiries on your credit file when reviewing your application for a loan. Too many hard pulls over a short time frame can be a red flag.

Can a lender conduct a hard credit check without my approval?

If a lender makes a hard pull for your credit records without your permission, you can dispute it with the credit bureaus to have it removed.

Will my credit score go up after a hard inquiry?

If you continue to use credit wisely and pay your bills on time, your credit score will increase over time.

Related:

Hard vs. Soft Credit Check: What’s The Difference?

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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