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

In the Northwest Territories, understanding the distinction between soft and hard inquiries is crucial for managing your credit score when seeking a car loan. A soft inquiry, such as when you check your own credit score or a lender performs a pre-qualification check without a full application, does not impact your credit score. These are valuable tools for gauging your eligibility without risk.

Conversely, a hard inquiry occurs when a lender formally accesses your credit report to evaluate your creditworthiness for a specific loan application. Each hard inquiry can cause a small, temporary dip in your credit score. However, for car loans in Canada, credit bureaus like Equifax and TransUnion typically employ a "rate shopping" window. This means that multiple hard inquiries for the same type of loan, such as an auto loan, made within a concentrated period-generally 14 to 45 days-are often treated as a single inquiry for scoring purposes.

This "shopping window" is designed to empower consumers in NT, and across Canada, to compare offers from various lenders to secure the most competitive interest rates and terms without being unduly penalized for seeking the best deal. As we move into 2025, with potential fluctuations in market interest rates, effectively utilizing this window can lead to substantial savings over the life of your car loan. It's essential to complete your rate shopping within this timeframe to protect your credit score while securing the most favourable financing.