Check Your Credit Report - Credit Report Inquiries Explained

There seems to be a great deal of confusion when it comes to credit inquiries on credit reports. Many people erroneously believe that all inquiries that are made into their credit reports are universally reported, and have a detrimental effect on their credit scores. Luckily, this is not the case and we’re going to shed some light on this important subject. This subject is one that has kept many people from checking their own credit reports for fear of hurting their credit scores.

The Q&A on Credit Report Inquiries:

What Is A Credit Inquiry?

A credit inquiry is a record of a request to view your credit file. Any time your credit file is accessed, whether by a creditor looking to extend credit to you or by an insurance company or employer looking into your financial record for business purposes, an inquiry is recorded. However, not all of these inquiries are treated in the same way, nor are they all visible to any party that pulls a copy of your credit report.

Who Can Make An Inquiry Into My Credit Report?

According to the Fair Credit Reporting Act, only businesses with a “permissible purpose” may view your credit report. Other than individuals or businesses that fit into this general definition, only you and those that you have given written permission may pull your credit report. These may include employers, landlords, government agencies and other businesses that may need to check your credit report for internal purposes, licensing, and legal issues.

Are All Inquiries Reported In The Same Way?

Not all inquiries are reported in the same way.

 There are two types of inquiries that are recorded by the credit reporting bureaus:

1. Hard Inquiries –These are inquiries that are made into your credit report as a result of your application for credit for things such as auto loans, credit cards, mortgages, personal loans or other types of credit extensions. These inquiries are recorded on your credit report and remain there for two years. These can be viewed by any other party that pulls your credit report within that time frame.

2. Soft Inquiries –These are inquiries that are made into your credit report by you, or another party to whom you have given permission, as part of an information gathering process or for reasons other than extension of credit. These are inquiries done by you, a prospective employer, insurance company, landlord or government agency or any other non-creditor. These types of inquiries are visible only to you, and are not reported to those who pull your credit report as part of a credit application process.

How Do These Inquiries Affect My Credit Score?

Soft credit inquiries have no effect on your credit score. Several hard credit inquiries in a short period of time may adversely affect your credit score. This is due to the way that scoring models work along with the presumption that consumers who apply for a great deal of credit within a small time-frame may be in a less than optimal financial position. There are exceptions to this rule, mainly in the case of shopping for mortgage rates where a high number of credit inquiries that fall within a short date window. This usually happens up to 45 days, and these are recorded as a single inquiry on a credit report, so as not to penalize a consumer for “shopping around for the best rate”.

Does Credit Monitoring Affect My Credit Score?

Inquiries made by a credit monitoring service are treated in the same way as your own inquiries into your credit report. They have no effect on your credit score. This is a good reason to consider using a credit monitoring service to check your credit file for any changes or to alert you to a high number of inquiries in a short period of time. This is a very good early indicator of identity theft as any party that has stolen your information may attempt to open many credit accounts in your name.