Understanding Financing
Navigating the world of financing can feel overwhelming, especially if you're new to credit or loans. At Plutu.ca, we believe in making things simple and transparent. Whether you're looking to finance a new purchase or improve your financial standing, understanding how financing works—and how it affects your credit—is a great place to start.
What Is Financing?
Financing is essentially borrowing money to purchase goods or services that you may not be able to pay for upfront. This can include everything from home appliances to dental procedures or even a dream vacation. In Canada, financing typically comes in the form of loans, lines of credit, or point-of-sale financing through third-party providers.
Repayment terms vary based on the lender, your credit profile, and the amount borrowed. It’s important to understand interest rates, payment schedules, and any associated fees before committing.
Why Credit Checks Matter
When you apply for financing, lenders often need
to assess your credit history. This helps them determine
how likely you are to repay the money you borrow.
This process usually involves a credit
inquiry—but not all credit checks are the same.
Hard vs. Soft Credit Inquiries
Hard Inquiry:
A hard inquiry (or hard pull) occurs when a lender checks your credit report to make a lending decision—like when you apply
for a credit card, car loan, or mortgage. Hard inquiries can affect your credit score, usually by a few points, and they stay on
your report for up to 3 years in Canada.
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Soft Inquiry:
A soft inquiry (or soft pull) does not impact your credit score. These checks occur when you check your own credit, or when a company pre-approves you for an offer without a formal application. At Plutu, we use soft inquiries to assess your financing options—so there’s no risk to your credit score just for checking what you qualify for.
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Final Thoughts
Financing is a powerful tool that can help you reach your goals—when used wisely. Understanding how credit inquiries work is an important step in protecting your credit score and making informed decisions. At Plutu.ca, we make the financing process easy, safe, and accessible for Canadians from all situations.
Rate Shopping
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If you're comparing offers from different lenders for a similar type of financing, rate shopping can help you get the best deal.
In Canada, credit bureaus like Equifax and TransUnion understand that smart consumers may apply to multiple lenders in a short time to find the best rate. That’s why they may treat multiple hard inquiries for the same type of credit within a short window (usually 14 to 45 days) as a single inquiry for scoring purposes.
This means your credit score should not be penalized for each lender you consult, as long as the inquiries are made close together and are for a similar type of financing.
Still, it’s wise to be strategic and to contact the credit bureaus yourself to get the most up to date information and guidance for your life's situation.
