Car Loan News

Stay connected with us by reading our blog. We post industry news, special deals and promotion, and opinion pieces from experts around the car loan industry.

Apply Now

Fill out the form below to get a FREE quote.

I agree to the Terms & Conditions

What Is a Hard Credit Check and When Does It Happen?

04/02/2019 @ 7:02 am

With an increasing number of Canadians monitoring their credit, many are noticing that hard credit checks show up on their credit file. Unless you’re familiar with the finance industry, such a term can be confusing.

First off, you need to learn what a credit check is and how a hard credit check differs from a soft one. That differentiation is important. From there, you need a solid understanding of when a hard credit check would happen first a soft pull.

Finally, you will gain knowledge on what a hard credit check does to your credit report and score and how it

Struggling With Credit

If you have bad credit in Oshawa, it’s a good idea to keep an eye on your credit file. Actually, it’s wise to do so even if your credit is in excellent shape, since it alerts you to any suspicious activity which could indicate fraud.

Credit problems can be quite frustrating.

As you keep watch over your credit report, you likely will notice hard credit checks showing up. Naturally, people wonder what these are all about, what kind of effect they have, and when a hard credit check will show up on their file. This kind of information will help you to better manage your finances, so the next time you apply for credit you’ll be prepared.


You might have heard the term “credit check” before, especially if you suffer from bad credit in Oshawa. Also called inquiries on credit reports, a credit check is when someone takes a look at your credit file. There are two types of inquiries: soft and hard. The differences between these are key.

A soft inquiry or credit check happens when someone who isn’t a prospective lender. This could be when you pull your own credit report to see where things stand. Sometimes credit card companies, car dealerships, and other businesses do a soft credit check to see who might qualify for a promotional offer, then they send you something to entice you into applying for credit. This is how you get all those mailings that let you know how great of a car loan you can get or try luring you into applying for a specific credit card.

If you already have credit with businesses, they might do a soft credit check to see if anything on your file has changed. Credit card companies do this on a regular basis, just so they know if you’ve suddenly gotten into some serious financial trouble.

When you already have a credit card, the company might be checking your credit report as often as once a month. This is to help the lender monitor if your financial situation has changed suddenly. If you have a sudden spike in hard inquiries, collections, late payments, or other negative activity, the credit card company might decide to suddenly lower your credit limit as a way to discourage abuse of the credit card. These can also be signs that someone is preparing to file bankruptcy, which is why the credit card company will act to protect itself.

Your insurance provider can and probably does perform soft credit checks on a regular basis. Insurance companies claim research indicates that people with poor credit are a greater risk. They have a record of making more insurance claims than people in the same situation who have good credit. A poor credit score or troubling items in a credit report can indicate a lack of responsibility, which in turn could lead to behaviors which cause a car accident, home fire, etc.

Employers or potential employers might also perform a soft credit check to see where you stand financially. If you work in the financial industry or a position where you have access to money or valuable goods, this is a way for employers to protect against potential fraud. Sadly, some people with financial problems will steal from their employer to correct the issue. In some companies, a soft credit check is done on a regular basis, giving you incentive to keep your credit report as clean as possible. With bad credit in Oshawa, there are quite a few benefits for improving your situation.

Now that you know about soft credit checks, it’s time to learn about hard credit checks. These have an effect on your file, particularly if you have bad credit for Oshawa residents, so it’s critical you understand the difference.

A hard credit check is an inquiry by a potential lender. This usually is the result of your applying for a line of credit, initializing the review process. Each time you do one of these applications for a credit card, car loan, or a home loan, the inquiry is recorded on your credit file.

Rate Shopping

Since hard credit checks can harm your score, you might be scared to go shopping for a car or talk to multiple lenders about getting a home loan. That’s something everyone worries about, but the concern really isn’t necessary.

Creditors and the credit bureaus understand that you need to engage in what’s called rate shopping. This is when you’re trying to make a big purchase and are interested in getting the best interest rate and terms on a loan. To go with the first loan approval would quite frankly be foolish, simply because you have no idea if you can do better. The only way to find out is to apply with several lenders at about the same time.

Shopping for the best deal on anything is a good idea.

When you go to a car dealership or a home loan brokerage, they often collect your information and pass it along to numerous lenders. Each of those lenders will do a hard credit check to see if you can qualify for a loan with them. If you go to several dealerships or brokerages, that could easily result in over a dozen hard credit checks in no time, especially for anyone with bad credit in Oshawa or the surrounding area.

Fortunately, the credit bureaus have an accommodation for rate shopping, otherwise your credit score would take a huge dive every time you try to make a big purchase using credit. Hard inquiries for these activities which are done within about a 45-day period all count as a single inquiry, instead of being tallied up individually. It’s a sensible solution that means you can shop for the best interest rate on a loan without worry.

Inquiry Damage

Yes, too many inquiries on your credit report can in turn hurt your score. Just how much of an effect it has really depends on your credit score and credit history. Sadly, the worse off you are, the more an inquiry can do damage. This is why you shouldn’t be applying for credit cards constantly or going to dealerships to apply for a loan every few months.

This might not seem fair, but you have to look at things from the lender’s perspective. People who are in financial trouble will often try getting multiple new lines of credit as a way to temporarily solve the problem. Of course that doesn’t work, and it can mean the lenders lose quite a bit of money as a result.

People who apply for credit constantly demonstrate that they’re financially careless. If you’re just trying to see how many loans you can get qualified for, it’s likely you’re not really making a solid plan for the financial future. That’s a dangerous game to play since it most often results in disaster.

Unfortunately, there are some people who abuse credit to the point that they’re secretly preparing to file for bankruptcy rather than deal with the mess they’ve created. Sometimes a person files for bankruptcy because of a legitimate disaster in their life, and that’s a difficult situation. People who just carelessly abuse credit will often try getting all kinds of credit cards and other loans in the months leading up to when they plan on filing for bankruptcy. It’s a way to enjoy all kinds of lavish living before wiping away the debt. Understandably, creditors want to protect themselves from that kind of activity, which is why they monitor hard credit checks.

You shouldn’t apply for credit cards too often.

If you’re interested in getting a new credit card, the best strategy is to apply for a card only occasionally. Wait a few months in between applications, otherwise you look like more of a credit risk to lenders than if you were to be more patient in your pursuit of a card, especially for anyone with bad credit for Oshawa residents.

The good news is a hard credit check might not do any damage to your credit score. Usually hard inquiries drop it by a few points, which really has little to no effect on your getting approved for a loan or other things. They only stay on your credit report for a couple of years, with the effect on your credit score lessening as they become older. After a year they normally stop affecting your credit score, even though the inquiries are still on the report.

Soft Damage

Unlike hard inquiries, soft credit checks won’t hurt your credit score in the least. You can have dozens of soft inquiries and see absolutely no difference in your score. Some credit bureaus keep a record of these where you can see them in the report, while others don’t share such information.

Some people worry that checking their credit scores and credit history regularly will have a negative impact. This is unfounded. When you check your own credit report, it’s considered a soft inquiry. If anyone were punished for taking a proactive role in managing their financial situation, that quite frankly wouldn’t make any sense.


Sometimes a hard credit check shows up on your report when you haven’t applied for any new credit. If it’s a current or previous lender who performed the inquiry, it might be the result of a collection action, particularly if you’re the victim of bad credit in Oshawa.

If you haven’t paid off a loan or have missed payments, a lender might be wondering what’s going on with your financial situation. By getting a copy of your credit report they can have a better idea of what to do. Certain activities could indicate you’re in a position to pay off the old debt or that you might not be in any such position.

A hard credit inquiry from an old lender is a way for them to also get your updated contact and employment information. People often move or switch jobs, making it difficult to collect on unpaid debts. As you’ve applied for loans, utility service, etc. this information is updated in your credit file.

Disputing Hard Credit Checks

In some situations you might want to dispute a hard credit check on your credit report. This is why checking your file on a regular basis is a good idea, otherwise you might have these types of items on there for a while and not know what’s affecting your credit score.

There are rare occasions when a hard inquiry shows up on your credit without your authorization. That’s not a good thing since it might be a sign of identity theft. Someone else could have accessed your personal information and has been using it to try accessing credit for themselves. Obviously, that’s not something you want to have happen, since it could block you from getting approved for a loan you need later, even though you did nothing wrong.

The credit bureaus provide a way to dispute pretty much anything on your credit report, including hard inquiries. Of course, if you authorized the inquiry by applying for credit or something similar, you can’t legitimately dispute the inquiry on your credit report.

Guaranteed Approval

You might have seen ads for credit cards which promise guaranteed approval regardless of your credit history. No, these are not necessarily scams, since some legitimate credit card companies offer such a service for people with especially poor credit. You should always read all of the fine print in the credit card agreement before applying for one of these cards, but they can be a good way to establish positive credit after you’ve had bad credit in Oshawa or anywhere else in Canada.

In such a situation, the potential lender doesn’t do a hard credit check since they don’t care about what’s in your credit history. That doesn’t mean there is no inquiry, otherwise the lender would be taking a tremendous risk that you’re lying about who you are.

When you apply for one of these credit cards, the lender will do a soft inquiry as a way to confirm your identity. There is a chance that the lender might do a hard credit check if they see something troubling in the soft inquiry and they need a closer look at things, so beware. But also remember that the benefit to your credit score if you manage that credit card correctly will far outweigh any damage a hard credit check will do.


Ready to Apply?

Join Thousands of Canadian Drivers Who Trust Oshawa Bad Credit Car Loans

Get Approved Now