Q: I’m hoping to get my first mortgage for a condo, but I may have a low credit rating. I want to check my score but I heard that if you do that, it lowers your score. Is that true?
A: There are several factors that influence your credit score, with payment history being the largest of these (around 35 per cent of your score). Credit inquiries make up only about 10 per cent.
When you seek credit, it is reflected by the number of inquiries posted on your credit file in the last 12 months. Inquires in your credit report are the only information lenders have that demonstrate that you are actively looking for credit. There are different types of inquires that show on your credit report. The score only takes “hard inquiries” into consideration – those inquires that were posted on your credit report as a result of you applying for credit. When a lender with whom you have an account has received your credit report or when you request your own credit report, these inquiries are not considered as an inquiry. This means that your credit score does not get affected.
For most people, having a few inquiries on your credit report has a limited impact on your credit score. There is a common misconception that every single inquiry will drop your score a certain number of points. This is not the case. The impact of inquires will vary depending on your overall credit profile. Inquires will usually have a higher impact on the score of people with limited credit history or people with previous late payments. The best way to increase your score over time is to apply for credit only when you need it.
As time passes the age of your most recent inquiry will increase and your credit score will increase as a result, provided that you don’t apply for additional credit in the meantime. Again, the best recommendation is to apply for credit only when you really need it.
It is wise to check your credit report at least once, if not twice, a year to ensure everything is properly reported, and that if there are any discrepancies to get them revised by the credit reporting agencies. You can request your credit report for free at www.Equifax.ca or www.Transunion.ca. If you have any questions about your credit report or wants tips on how to improve it, speak with a professional mortgage expert.