We all know that when you apply for vehicle financing a credit check will be involved at some point, but did you know there are different types of credit inquiries? Canada East Rides is here to explain the difference between these inquires and how they affect your credit rating.
Soft Inquiry (Soft Pull)
These types of inquiries typically occur as part of a background check. They are not linked to an application for new credit; therefore, have no effect on your credit score. In fact, you may not even know they occurred because soft pulls do not require your authorization!
Soft inquiries are most commonly performed by companies or lenders who want to see if you qualify for some sort of pre-approved offer. If you’ve ever had a “You qualify for this pre-approval” offer sent to you in the mail, that company has most likely done a soft inquiry on you. Some employers are even doing soft pulls as an indicator of how responsible a potential hire truly is.
Are you scared of checking your own credit for fear of negatively impacting your credit score? Well don’t be because it is also a soft inquiry, so it will not affect your credit rating! It’s actually beneficial to check your credit periodically (1-2 times per year). By checking your score, you can ensure that all the inquiries listed are accurate and not signs of fraud.
Hard Inquiry (Hard Pull)
Hard credit inquiries occur when you apply for some form of lending from a financial institution. You should know when these types of inquiries occur because they require your consent to be performed and will definitely affect your credit score.
Hard pulls are initiated when you apply for any form of credit. This can include mortgages, auto loans, credit cards, business or personal loans, student loans or lines of credit, etc. If you are looking for financing of any kind, expect to have a hard inquiry on your credit report.
Hitting your credit report with too many hard inquiries, especially in a short period of time, can harm your credit score. Also, this type of behaviour can give lenders the perception that you are a high-risk client because it suggests you are short on funds or unable to qualify at other institutions.
- Soft pulls do not affect your credit rating, but hard pulls will.
- Avoid multiple hard credit inquiries (especially in a short period of time) as it can reduce your credit score.
- Don’t be afraid to check your credit report periodically to ensure it is accurate as it will not affect your rating.
At Canada East Rides, we believe that every Maritimer has the right to own a vehicle regardless of their credit situation. We specialize in getting cars for people no matter their credit score. And we won’t stop there. We have partnerships in place to help you get your credit back on track. Get in touch to learn more.