February 16, 2022

Checking your credit score – soft checks versus hard checks

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 members with Employee Assistance Program or Individual Assistance Program coverage can get support. Begin the process here.

Unsure of your coverage? Confirm your eligibility in your mybluecross®account.

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Since credit reports list your debts, they can come in handy if you’re concerned that your identity has been stolen to take on debt under your name. Be sure to look at each account and loan listed on the report and if you don’t recognize an item, contact the lender for more information. If it’s fraud, contact both Equifax and TransUnion after contacting the local police. You should also consider adding a fraud alert on your report, which requires lenders to take extra steps to confirm your identity before approving any credit applications. Adding a fraud alert to your Equifax report is free, while TransUnion charges five dollars. The Government of Canada recommends putting a fraud alert on your reports if your wallet is stolen or you experience a home break-in. Please note that fraud alerts stay on your report for six years, unless you remove them sooner.

If you’re particularly concerned about identity theft and can afford a monthly fee, chartered professional accountant Mark Binder recommends using credit monitoring services that are specifically meant to notify you when any changes are made to your credit report – for instance, a new credit card or loan. You can still view your debts with a credit report, but it may not be immediately obvious if any recent changes have been made.