In NS, what should I know about soft vs hard inquiries for car loans?

In Nova Scotia, as across Canada, understanding the difference between soft and hard credit inquiries is crucial when applying for a car loan. A soft inquiry, often called a 'soft pull,' occurs when you check your own credit score, or when a lender pre-qualifies you for an offer without a formal application. These inquiries do not impact your credit score and are not visible to other lenders, making them excellent for initial research and understanding your financial standing without any risk.

Conversely, a hard inquiry, or 'hard pull,' happens when you formally apply for a car loan, and a lender requests your full credit report from bureaus like Equifax or TransUnion to make a lending decision. Each hard inquiry can temporarily lower your credit score by a few points and remains on your report for two to three years. This matters because multiple hard inquiries in a short period can signal higher risk to lenders, potentially affecting your approval chances or interest rates.

However, Canadian credit bureaus account for 'rate shopping.' If you apply for several car loans of the same type within a concentrated period, typically 14 to 45 days (often considered 30 days by many lenders), these multiple hard inquiries are usually grouped and treated as a single inquiry for scoring purposes. This allows you to compare offers from different dealerships or lenders in Nova Scotia without unduly penalizing your credit score, ensuring you can secure the most competitive financing terms for your vehicle purchase in the current market.