Rebuilding Credit Scores in BC, Canada: Opening New Credit Account

Any time you apply for a new credit account – whether for a cell phone plan, mortgage, or another type of loan – the lender will complete an inquiry to assess your creditworthiness. Each time an inquiry is made, this information is reported to the Canadian credit bureaus for inclusion on your credit summary. If you have too many hard inquiries in your name, it can negatively impact your rating, making it more difficult to get approved for financing.

Understanding how opening new credit accounts can raise or lower your score, therefore, is essential.

What’s the Difference Between Hard and Soft Inquiries in BC?

There are two types of credit checks in Canada and they include:

Hard Inquiries: Also known as hard pulls or hard hits, these types of credit checks are initiated by financial institutions when a borrower applies for a loan. When opening a new credit account, you must permit the lender to look at your report, otherwise, they cannot gain access without your consent. A single hard hit may have a slight impact on your credit rating, but it’s not something to worry about. However, if you have many hard pulls in a short amount of time, it can drastically lower your score and give lenders the impression that you are credit-seeking.

Soft Inquiries: Unlike hard pulls, soft inquiries do not require your permission and they are often completed by sources other than lenders for background checks (such as applying for a job, submitting an application for an apartment, or renting a car). Soft pulls do not hurt your credit score and are not viewed by lenders. A soft inquiry will also occur anytime you request a copy of your credit report.

Why Does Opening New Credit Accounts Matter in BC?

When opening a new account, it’s a good idea to ask the lender what type of inquiry they will be making before providing consent to complete a credit check. Inquiries make up 10% of your credit score, so it’s crucial that you only open new accounts when you truly need them to maintain a healthy rating.

On the other hand, opening a new account is a great way to establish a credit rating if you have a zero score. By getting approved for a low-limit credit card or an auto loan and making regular, on-time payments, you can establish a positive credit history and boost your rating.

The same is true about credit mix, which accounts for another 10% of your score. If you only have one loan product in your name, this can lower your rating and your overall creditworthiness. When approving loan candidates, lenders want to see that borrowers can manage their debts – and a diversified loan portfolio is extremely beneficial.

Contact TransCanada Finance to Improve Your Credit Score With a Car Loan

If you are looking to rebuild your credit rating – or establish one altogether – consider applying for an affordable car loan for a vehicle that fits your budget. By making regular payments on time each month, your score will steadily improve, helping you qualify for better rates in the future.

Getting approved for auto financing is easy whether you have bad credit or no credit. Our team at TransCanada Finance works with all types of consumers, even those who have undergone bankruptcy. Allow us to help you find the perfect options to suit your needs.