Checking your credit score — soft checks versus hard checks
Your credit score can have a significant impact on your ability to make large purchases and take on new debt. But will checking your credit score affect your credit score? To answer that question, you need to know the difference between a soft credit check and a hard credit check.
Understanding credit checks
A soft credit check is an informal look into your credit history that lets you view your debts and an approximation of your score- with no effect on your score. A hard credit check is a formal investigation into your credit history- with a potential negative impact on your score.
A soft check is the most common type of check. When you go to a credit report company like TransUnion or Equifax- the two main credit organizations in Canada- you are doing a soft check on your credit. In addition to your approximate score, your report includes your personal information, your open and closed accounts and your outstanding debts. You can do a soft check whenever you want, with no negative impact on your score.
When you apply for a credit card or loan or submit a rental application for an apartment, your lending institution does a hard check. A hard check is a formal investigation into your credit- the score your lender sees will be precise. Too many hard checks in a short period can negatively affect your credit score, as this suggests to lenders that you may be taking on too much debt to pay off.
When you're preparing to make a large purchase, like a house or a car, you may want to run a soft check to see whether your credit is good enough to be approved. But unfortunately, soft checks don't always give you a clear picture of where your credit stands.
"For reasons that are not entirely explained, the soft checks aren't as reliable as the hard checks," says Mark Binder, a chartered professional accountant and financial counsellor with the Manitoba Blue Cross Employee Assistance Program. "And in Canada, it's the hard checks that really determine whether or not a lender is going to give you money."
But why aren't soft checks as reliable? Binder suggests it's down to the specific credit-checking services. When you do a soft check through an organization like TransUnion or Equifax, they use their own private criteria to determine your score. When you do a hard check through a lending institution, the lender will be seeing a score that's formulated using different criteria, Binder says.
A 2019 CBC Marketplace investigation showed that each credit-reporting organization gave customers a different score, and some were considerably lower than the score lenders see when running a credit check on a customer.
This can be frustrating for Canadians, who are unable to see the same information that their lenders see, Binder says.
"In Canada, we're operating in a black bag that we really don't know how to punch out of," he says.
Living with uncertainty
You may be concerned that you can't get a look at your exact credit score, but Binder points out that this uncertainty is inescapable.
If you're not planning on making a large purchase soon, Binder's recommendation is to simply live with the uncertainty. In the meantime, you can continue to monitor your approximate score and build good credit by paying your debts on time, using credit cards responsibly and only taking on debt when necessary.
Getting your credit report
You can get a free credit report from both TransUnion and Equifax. To get yours, follow the steps on the Equifax or TransUnion site. Both services offer paid monthly subscriptions with additional services, but these aren't necessary to view your report.
If you have financial concerns and want to talk to someone about debt or budgeting, Manitoba Blue Cross's counselling services are available to all Manitobans, regardless of whether or not you have coverage with Manitoba Blue Cross. Find the available support that's right for you here.
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