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Does CTFS do a hard credit check when you open a savings acct.
March 16, 2009
9:12 pm
looking_for_best_rate
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I want to open a savings acct with CTFS but cannot afford another hard credit check on my credit report.

Any insight would be appreciated.

March 16, 2009
10:19 pm
Doug
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All "virtual" banks pull a copy of your credit bureau when you open an account. It's not that you're applying for credit so it doesn't affect your score in that way in terms of having additional credit available to you but it is still an enquiry on your credit bureau. Enquiries last for three years with a minimum of up to five enquiries on your credit bureau at any time. (If you had opened and closed a credit card, I believe that would stay on your file for seven years - same with an orderly payment of debts or a bankruptcy.)

As to how much it affects your score to have another enquiry, so many enquiries in a short period of time will negatively affect your score to varying degrees. Can you wait three to six months before opening the account?

Hope that helps,
Doug

March 16, 2009
11:59 pm
jeremywong
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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.

March 17, 2009
9:15 am
Jason
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Basic on my credit file from Equifax, CTFS does not do any check.

For other banks, it's as follows:

CTFS: none
Citizens: hard
HSBC: hard
ICICI: hard
PC: hard
Peoples Trust: soft
ING: none

Maybe that's not the whole story though. Perhaps some banks determine hard/soft/none based on the applicant?

March 17, 2009
5:54 pm
Shawguy
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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

March 17, 2009
9:45 pm
Jason
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SG said:

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.


I opened my accounts at CTFS, ING, ICICI, and PC before that date. The rest were done after.
March 17, 2009
9:47 pm
Doug
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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

March 13, 2013
12:54 pm
Jess
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Doug said

All "virtual" banks pull a copy of your credit bureau when you open an account. It's not that you're applying for credit so it doesn't affect your score in that way in terms of having additional credit available to you but it is still an enquiry on your credit bureau. Enquiries last for three years with a minimum of up to five enquiries on your credit bureau at any time. (If you had opened and closed a credit card, I believe that would stay on your file for seven years - same with an orderly payment of debts or a bankruptcy.)

As to how much it affects your score to have another enquiry, so many enquiries in a short period of time will negatively affect your score to varying degrees. Can you wait three to six months before opening the account?

Hope that helps,
Doug

Hi Doug and to anyone else that can help me,...

What do you mean "Enquiries last for three years with a minimum of up to five enquiries on your credit bureau at any time"? So, does that mean enquires will affect my score for 3 years, and at least 5 will be on my credit report forever? So I can never get them off? How does this affect my overall score.

I have been rate hopping the last 3 years, and opened 2-3 savings accounts per year. I got a copy of my credit report, and it shows the "hard" hits and "soft" hits. I'm worried about the hard hits in the future (I want to buy a house), and when will these be taken off. I just opened savings accounts, not any loans, credit cards, car loans...etc.

March 13, 2013
5:48 pm
Doug
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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

November 28, 2013
2:20 am
Loonie
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It seems to me that there is something unconscionably bizarre about the idea that opening several bank accounts within a year might somehow adversely affect one's credit rating. The reason to open bank accounts is to DEPOSIT money. In other words, opening a bank account means you have money. Opening several of them means you have even more money, and are probably doing so in order to ensure that your money is fully covered by CDIC or similar, and that you are conscientiously managing your money so as to get the best return for your situation.
So, why would a credit agency want to discriminate against people who have money and are actively managing it to best advantage?? It's the people who don't have money, and do have debt, and aren't managing the situation very well, who ought to be their concerns.
If this is what these agencies are doing, then they have far too much power, and our government needs to regulate them more closely.

November 28, 2013
11:52 am
Doug
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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.

November 28, 2013
1:38 pm
Loonie
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Thanks for the info, Doug.
Do you find out which agency these banks use just by asking them? I'm glad to hear that it only affects a small portion of one's credit rating. Perhaps consumers could start fighting back by not doing business with the ones that use the overkill approach.
It's all the more remarkable when you consider that these agencies are notorious for having wrong information about people, which is hard to erase.

Ellen Roseman, where are you?...

November 28, 2013
11:17 pm
SD2013
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Loonie, I think the best way to fight back is borrow as little money as possible or nothing at all by paying everything with cash or paid in full, debit card, check etc.

I know this may not be possible for everyone but just by what you are saying about being financially responsible and saving, investing money which by maximizing TFSA's, RRSP's etc. and non-registered accounts, cash reserves will make this current credit reporting problem look like a bad memory.

The best defense is having as little debt as possible, paying down debt as soon as possible and not believing that a house is going to be your biggest investment or that your primary residence is an investment.

It is an asset that may go up or down in value that can be sold later but don't use it as an ATM or piggy bank borrowing against your equity plus using it as your retirement like most Canadians believe is a good financial decision once it is paid off.

The less you are dependent on using the bank's credit or any financial institution's credit, the less financial cost this credit reporting system they setup will impact you.

Good points everyone, thanks for bringing this topic up. This happened to us with P.C. Financial and this is why we don't have any accounts, GIC's, RRSP's etc., from SD2013.sf-cool

December 8, 2013
1:44 pm
Doug
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Loonie said

Thanks for the info, Doug.
Do you find out which agency these banks use just by asking them? I'm glad to hear that it only affects a small portion of one's credit rating. Perhaps consumers could start fighting back by not doing business with the ones that use the overkill approach.
It's all the more remarkable when you consider that these agencies are notorious for having wrong information about people, which is hard to erase.

Ellen Roseman, where are you?...

I do ask them, yes, when I don't have accounts with them but am considering an account. If I have an account with them, it shows up on my free "consumer disclosure" that I order annually (usually in October or November) from each of Equifax and TransUnion.

On TransUnion "consumer disclosure", "soft" checks appear as "non-credit related inquiries" while "hard" checks appear as "credit-related inquiries".

On Equifax, "hard" checks appear first under "inquiries" and then under a separate description of that section, any account review- or soft-type enquiries show up.

Hope that helps,
Doug

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