Does CTFS do a hard credit check when you open a savings acct. | Canadian Tire | Discussion forum

According to Canadian Direct Financial, a soft credit report is run, so your credit rating isn't affected. It's reasonable to assume other banks have the same policy.

Jason did you open your ING and CFTS accounts before June 23, 2008? Before June 23 most banks were performing credit checks but were not required by law to do so, I believe after this date...ALL Banks if application is by internet, phone or mail have to, the only way to avoid this is by going into a branch and opening in person...which you can't do with virtual banks.

As for the Hard or Soft hit...CTFS I can't comment on as I don't deal with them, but some of the other ones I see that I do deal with, my experiences have been the same.

Thanks
SG

SG, you are correct, I believe. All "virtual" banks without branches where face-to-face contact is not possible are required under the Proceeds of Crime and Terrorism Financing Acts to take you SIN, your driver's license, credit bureau and cleared personalized, pre-printed personal cheque together to form their basis for establishing identity. I didn't realize prior to June 23rd, 2008, "virtual" banks didn't have to do credit checks but definitely after that date they do.

You are quite right about visiting a branch and opening an account to avoid having your credit bureau "dinged". ING Bank of Canada has "cafes" in major cities like Vancouver, Calgary, Toronto, Montreal, those sorts of places, and HSBC Bank Canada has some 150 branches across the country where you can visit and open new accounts in-branch.

As for Canadian Tire Financial Services, unfortunately, being they have no branches (some Canadian Tire stores have Canadian Tire-branded ABMs but that's all), a credit check would be mandatory then.

Hope that helps,
Doug

Hi Jess,

What I meant by that statement above is that I believe Equifax and TransUnion will keep your "hard" enquiries (that is, those that are disclosed on your credit bureau report to other credit grantors) for a minimum of three years. If you have less than five "hard" enquiries and let's say one is from four years ago, it may still show on your report but would drop off the next time you had another "hard" enquiry. Hope that makes sense.

In terms of "hard" enquiries affecting your credit score too much, unless you have no active/open credit facilities, the number of enquiries (unless you do too many in a short period of time) has a minimal affect on your overall score. I used to be worried about it but now I allow myself, let's say, 3 "hard" enquiries per year and could probably even go as many as 5. The things that will hurt your score more are things like derogatory ratings (i.e., have you missed a payment? been late on a payment?) or if your percentage of "used credit" to "available credit" is too high, or the obvious like bankruptcies and credit counselling.

In short, as long as you've got at least a credit card, maybe a small line of credit or overdraft and possibly a small personal loan (i.e., a vehicle), you're always making your payments on time and don't run up high balances (i.e., "maxing things out"), you should be fine.

Cheers,
Doug

It's important to note the credit rating agency, such as Equifax, TransUnion and Experian (through its Northern Credit Bureaus subsidiary in Canada), does not actually make a credit decision. It does, however, take various factors (i.e., number of recent "hard"/credit-related enquiries in a certain amount of time being one, but that only makes up 5-10% of your credit score, if memory serves me correctly) in calculating your credit score (commonly called a "beacon score" in Canada or a FICO score in the U.S.). So, yes, they are accurate in saying they don't make credit decisions, but you're quite right, let's be real: they ARE a major factor in determining decisions.

The problem generally lies in how the credit bureau enquiry is done. Generally, if it is performed via Equifax, it is a "hard" enquiry as their "soft" enquiries are generally the sort of "soft" account review-type enquiries companies that have an existing relationship do on an annual basis to either review your ATM "cash back" limit, change your credit card interest rate (up or down) or potentially increase your line of credit limit. If it's a "soft" (non-credit-related enquiry), it's generally TransUnion.

Ideally, I'd like to see all "savings"-type institutions do only "soft" checks as they do get all of your information (including credit score) on a "soft" check (which has no impact on credit score). So the issue is really with the institution doing the check, not the credit ratings agency.

I can only speak to who I've dealt with but, it goes like this (in the order opened):

Scotiabank - none (but I had my account since I was under 10 years old, so not sure if they do credit checks on in-branch straight account openings - they would for non-face-to-face account openings definitely - but, if they do, assume it would be "hard" as they use Equifax)
HSBC - "hard" (via Equifax - as of 2013, has ceased all non-face-to-face account openings - account openings must be done in-branch, which is a big turnaround considering they were a pioneer with their now-defunct virtual banking brand HSBC Direct)
ResMor Trust Company (now defunct, was as "Ally Canada" until April 2013) - "soft" (via TransUnion)
Hubert Financial, a division of Sunova Credit Union - "soft" (via TransUnion)
Tangerine (formerly known as ING DIRECT Canada) - "soft" (via TransUnion)
Implicity Financial, a division of Entegra Union - "soft" (via TransUnion) to verify identity on online application but "hard" (via Equifax) at final account opening stage for regulatory compliance - have suggested they use only TransUnion

As well, I have also confirmed, through preliminary correspondence over the years from the following institutions who I never proceeded to account opening stage that:

PC Financial, direct banking division of CIBC - "hard" (via Equifax)
Coast Capital Savings Credit Union - "hard" (presumably, via Equifax)
Vancouver City Savings Credit Union - "hard" (presumably, via Equifax)
Envision Financial/Valley First, divisions of First West Credit Union - "hard" (via Equifax)
Canadian Direct Financial, a division of Canadian Western Bank - "soft" (presumably, via TransUnion)

As well, in general, the "Big Five" banks, plus presumably National Bank of Canada, all do "hard" checks - if they do credit checks at all for straight, face-to-face and in-branch account openings.

Hope that helps,
Doug

P.S. It's true that it's not a credit-related type transaction opening only a "savings" account; however, there ARE nefarious individuals who would try to intentionally commit fraud (i.e., depositing an empty envelope) and so, particularly when an ATM card is involved, it's prudent from a risk mitigation standpoint to do a credit check for all "new business" transactions, including "savings" account openings). That said, if they chose to do business with TransUnion instead, they could do a "soft" check and net the same information on the individual(s). A credit check also helps the individual as it may determine a higher ATM "cash back" limit or potentially an auto-approved overdraft, which prevents nasty NSF fees, to new clients with good credit histories right "out of the gate".

A "virtual" bank with no ATM cards wouldn't likely need to do any credit check, except for the fact they're required to by legislation in place for non-face-to-face account openings to confirm identity. Again, they could choose to do a "soft" check.