Does a soft credit check affect your credit score?

The short answer is no. A soft credit check won’t affect your credit score one way or the other.

But it’s important to know the difference between a soft credit inquiry and a hard one.

You don’t want to find out your precious credit score has been dinged because those checks you thought were soft were, in fact, hard.

Read on to find out when a credit inquiry is soft vs. hard, when each of those checks happen, and how you can monitor and improve your credit score. (Hint: KOHO can help).

What is a soft inquiry?

A soft inquiry (also called a soft credit check or soft pull) is when you request a copy of your credit report or check your credit score.

You aren’t the only one who can initiate a soft inquiry on yourself. Here are a few other situations where a soft credit check can happen to you:

• Your employer checks your credit history before they hire you

• A company sends you a “pre-qualified” promotional credit card or mortgage offer.

• A lender does a regular review of an account you have with them

You can think of a soft inquiry as a person or company (or yourself) just having a little look-see through your credit history. It’s usually no biggie.

But you can “fail” a soft pull. If your employer, for instance, doesn’t like what they see, they can decide not to hire you.

Of course, a soft inquiry implies the existence of a hard inquiry.

What is a hard inquiry?

A hard credit check happens when someone conducts a more thorough investigation into your credit history.

You usually have to sign off on a hard check, as it’s fairly invasive.

They happen when a lender needs to make sure you’re a suitable candidate for something serious, like a credit card, mortgage, auto loan, student loan or apartment rental.

Think of a hard inquiry as an accountant-type sitting down with their reading glasses to take a long, hard look at what type of financial consumer you are.

Hard checks can include your past addresses, social insurance number, date of birth, previous employers, credit accounts, payment history, bankruptcies, whether any of your debts are in collections, outstanding judgements made against you, and who else has made hard inquiries on your credit report.

The good/bad news is, your credit report isn’t permanent. All the information in there will disappear after about six to seven years.

Each hard inquiry will lower your credit score, but only a little bit. However, those little dents can add up to a big problem if you trigger too many hard inquiries at once.

There are sometimes ways to get around the hard inquiry credit score ding.

Some banks, like TD, promise that if you apply for a mortgage pre-approval online, it won’t affect your score.

And if you’re looking around for the best mortgage rates, and a few different companies all make hard inquiries around the same time, that’s usually treated as one hard inquiry.

Your time frame for this is around 14 to 45 days, according to Equifax.

Since we can already hear the gears turning in your head, no — that doesn’t work for credit card applications.

What is a credit score and why does it matter?

Your credit score is a number from 300 to 900 that represents how big of a risk you are to a lender.

Someone with a very high score will be seen as a safe consumer. Banks are more likely to give these people credit cards with bigger limits and better rewards.

Low scores, on the other hand, denote someone with a less-than-sparkling credit history — or very little history, which lenders also see as risky.

People with low scores will find themselves denied those shiny credit cards, good mortgage rates — and even, potentially, home rentals.

Scores up to around 600 are generally seen as poor. An okay score is around 700. Getting into the mid-to-late 700s is good, and anything above 800 is excellent.

Who decides my credit score and how?

In Canada, your credit score is calculated by the two major credit bureaus: Equifax and Transunion.

(The two private companies might come up with different numbers, but they’ll be similar).

To do that, they look a variety of factors in your financial past. The exact witch’s brew that is your credit score is a secret.

But we know it includes things like your bill-paying history, your debt, how much credit you use, what types of accounts you have, whether you’ve been bankrupt, and much, much more.

How can I monitor my credit score?

You can get a copy of your credit report online for free from Equifax and TransUnion (note that TransUnion calls it a “consumer disclosure” for some reason).

A credit report is a full list of your credit history. Your credit score should be included as part of that report.

You can also request a mailed copy online or over the phone, or get one in person.

This Canadian government site has direct links to each of those options.

Equifax and TransUnion also offer credit monitoring services. These will alert you whenever there’s a change to your credit score.

Those are paid services. But they can be handy if you need to hit a certain score, or if you’re worried about fraud.

You can also use free third-party sites like Intuit Credit Karma, which display your credit score in an easy-to-read format after a simple login.

Some will even provide credit monitoring services for free.

These sites usually pull their information directly from Equifax and TransUnion — so the credit score number is reliable.

But if you have to submit a credit report for a rental application, the score alone usually isn’t enough. You’ll likely have to get your full credit report right from the source.

What should I look for in my credit report?

It’s important to look through your credit report beyond your credit score, to make sure all the information they have is correct. These reports are made by humans, after all.

Double-check your name, addresses, account information and payment history look legit. Make sure there’s no information there that you don’t recognize.

This could be a simple error, or it could be a sign that someone somewhere is using your personal information to buy stuff or impersonate you. Not good!

If there’s something fishy, you can file a dispute with the credit bureau to change or remove the inquiries from your credit report. This may also bump up your credit score in the process.

How can I improve my credit score?

There are lots of ways to improve your credit score. They all require a little bit of effort, but most are very simple.

Stop making it worse

This may be an obvious first step, but like mama always said: if you’re in a hole, stop digging. Here are some quick rules to follow to stop dragging down your credit score:

• Don’t apply for too many credit cards

• Don’t carry a balance on your credit card

• Don’t open unnecessary bank accounts

• Don’t overdraft your bank account (or use overdraft protection)

• Don’t default on loans

• Don’t write bad cheques

Now, let’s talk about what you can do to improve your score.

Pay down your debt

Negative money is bad money. To really get the ball rolling on building good credit, you’ll need to pay off your loans. Start with the highest-interest ones first.

For many people, that means tackling their credit card debt. But it could also include late or missed mortgage, student loan, or child support payments.

Pay bills on time

The easiest way to build your credit score is to use credit and pay it back on time. Boring, but simple.

Harness the power of modern convenience by setting up auto-payment plans for utility bills, credit cards and everything else with a regular balance.

KOHO allows you to set up automatic withdrawals and pre-authorized debits from your account, so you never miss another car insurance payment.

If you’ve been delinquent on a bill for more than 30 days, you should pay it as soon as humanly possible.

Use KOHO Credit Building

If you want an easy and risk-free way to build your credit, KOHO has a program specifically to help you do just that.

When you sign up, KOHO opens a line of credit for you. Then, every month, you choose an amount to set aside from your line of credit.

KOHO will then report that amount as an on-time payment to Equifax — making you look like the responsible, diligent credit user you know you are.