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What is a Soft Credit Check in Canada?

When you apply for a loan, the lender or institution can carry out a credit check on your account to get an insight into your finances. A credit check is a search process carried out by a company or an individual to evaluate your credit history.

There are two different types of credit checks in Canada, a hard check and a soft check. Click here to read about Hard credit checks in Canada.

Credit checks are done majorly to review your financial behaviour. Most times, institutions do not need your permission to carry out a credit check. However, they must have a legitimate reason to do so.

This article will be reviewing soft credit check in Canada, and what it entails.

What is a Soft Credit Check in Canada?

A soft credit check generally happens when you or a 3rd party reviews your credit for non-lending functions. This might occur once you examine your credit, an organization offers you a replacement product or service or when a corporation where you have an existing account wants to verify your credit. The following factors can trigger a soft credit check:

  • When applying to rent a home
  • Application for employment
  • When applying for insurance
  • For identity verification purposes

Most soft credit checks are done mainly to check your eligibility status for some form of offer, like in a credit card promotion. A credit card company has the right to run a soft check on you to make sure you meet their qualifications.  

It is crucial to note that soft credit checks do not impact your credit scores. This suggests that requesting your credit score or report counts as a soft credit check and doesn’t affect your credit scores. Your credit card provider may verify your credit when deciding to supply you with a credit limit increase or promotion.

Soft credit checks will solely be seen by you and the person who created the initial check. This implies that once a prospective investor looks at your credit file, they won’t see any of the soft credit pulls that have taken place, but they’ll be able to see the hard checks.

Perks of running a Soft Check

Since a soft check does not leave a trace on your credit report, it always comes in handy to ascertain your eligibility for a good credit range. This applies whether you are trying to apply for a loan, going for a vacation, or getting a credit card for everyday purchases. There are currently no limits to the number of soft checks you can run on your account in Canada.

You don’t have to be worried about how frequently you run a soft check; it does not mare your report. You can check your credit reports from each of the three major bureaus in Canada to spot any inconsistencies that may affect your ability to get a loan. In Canada, you are entitled to get a free report from each bureau once a year. If you’ve been denied a loan application recently, you may get a free report.

Performing Soft Credit Checks on Your Credit Score for Free

Gone are the days when you were required to pay a certain fee, usually CA$20 or above, to TransUnion or Equifax to obtain your credit score. There are currently multiple ways to run a free soft credit check in Canada.

To make it hassle-free, you can have access to quarterly, monthly, or perhaps weekly credit score updates, all at no cost!

The companies providing this free service have other services they promote and credit cards, personal loans, etc. However, you’re not obligated to take any of their different offerings/services. Below are some firms you can get a soft credit check from for free:

  • Borrowwell

Borrowwell provides access to free monthly credit scores and credit reports to individuals. They don’t charge any fees, and they also update your credit score and report every month. Borrowell provides a free Equifax credit report.

  • Mogo

They offer access to your free credit scores via Equifax. It is conjointly updated every month.

  • Credit Karma

Credit Karma provides access to free credit scores via TransUnion. They also issue you your credit report. For a TransUnion credit report, you can access your report online and transfer it.

  • Ratehub

Ratehub offers one-time access to free credit scores via Equifax. For Equifax, you’ll get an invitation by calling them at 1-800-465-7166.

Applying for a Free Credit Score

There are several ways to apply for your credit score; however, using the online medium is the easiest. To request your credit score online, visit your credit provider’s website and enter your data.

Note that you may be requested to answer some questions to validate your identity. The application process takes about three minutes or less to conclude. Using an online method to check your credit score translates as a soft check. It is advisable to merge both your Equifax and TransUnion credit scores as most times lenders report back to one, and your credit scores could vary.

Your credit report provides many details regarding your credit history and may be obtained free of charge from the credit bureaus, alongside Equifax and TransUnion. It is advisable to keep tabs on each of your credit score and credit report. That way, you’ll quickly establish any errors (if any) and also track growth in your credit profile.

Impacting Your Credit Score

There are currently two significant factors that influence your credit score in Canada: payment history and credit utilization. Your credit utilization is how much of your available credit you are using. Below are some tips on how to impact your credit score in Canada:

  • Make timely payment

Ensure to pay all your bills, not only your credit card payment, on time. Making late payments and accounts charged off will affect you’re your credit score negatively. Learn how to remove a late payment from your credit report here.

  • Utilize no more than 30% of your credit limit

It is advisable to use less than 30% of your credit limit on any of your credit cards. The best credit scores are mostly allotted to people utilizing 10% or less of their credit card limits.

  • Ensure your account is active

Keeping your account open and as active as possible will give you a more extended payment history. It can also help your credit utilization.

  • Maintain existing cards

Rather than opening too many new accounts simultaneously, you can maintain and ensure your existing accounts are in good standing. This is because new accounts lower your average account age. Also, it means every application leaves a dent in your credit score. It is advisable to give each of your credit applications a 6-month spacing.

Bottom Line

Summarily, a soft credit check is a search on your credit report to give you an insight into your financial history. You, a bank, or a credit card issuer can carry out this check.

A soft check is mostly done for a few non-lending reasons. Most importantly, this sort of inquiry doesn’t affect your credit score. Also, nobody can see them except you or the person who requested it.

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