All of us have certain things we don't want others to see. For me, it's my eighth grade yearbook picture...the video of my karaoke debut...all the junk under my bed...and the personal information in my credit report.
While we can keep most of our private stuff private, your credit report is the one thing some outside parties have permission to access.
When someone requests a copy of your credit report, it's called a credit inquiry. But exactly who can look at your credit report? And, how do these inquiries affect your credit score?
Here's looking at you, kid
To keep any Joe Schmo from getting their hands on your report, the Federal Fair Credit Reporting Act (FCRA) restricts access to your credit information. Generally, only businesses and parties with "permissible purpose" can view your credit report. Examples of permissible purpose include accessing a credit report for a credit application, the underwriting of insurance, in connection with determining eligibility for a license or government benefit, or for a business transaction initiated by a consumer.
In other words, anyone with a legitimate business need can gain access to your credit history. This includes creditors, lenders, insurers, and landlords who need to review your credit as a part of an application process. Employers and potential employers can also request your report, but only with your permission. Anyone who obtains a copy of your report under false pretenses can be fined substantially and jailed for up to two years.
Of course, you have every right to know who is looking at your credit report. There's a section on your credit report that lists everyone who accessed your report in the last two years.
Once you know who is looking at your report, you may start wondering how these inquiries affect your credit score.
Hard vs. soft inquires: what's the difference?
There are two types of inquiries: hard and soft. When you apply for a mortgage, car loan, or other credit, a lender is authorized to request your credit report. This is a hard inquiry, and this type of inquiry can impact your credit score.
When businesses do a credit check to offer you pre-approved offers of credit or insurance it is a soft inquiry, which does not affect your score. Soft inquiries may also be generated under other circumstances, such as when a utility company or a company you already have an account with looks at your report. Requesting your own report from a company like TrueCredit is also a soft inquiry.
Let's get back to hard inquiries. These play a part in your credit score because you initiate the inquiry. If there's a long list of applications for credit cards on your report, you may look credit hungry in the eyes of lenders. This could make you a higher risk, so your credit score may drop.
The story is a little different when it comes to secured loans. Looking for a mortgage or car loan may cause several lenders to request your credit report, even though you're only after one loan. Because of this, multiple auto or mortgage inquiries in a two to three week period may count as just one inquiry depending upon the creditor -- and could have little impact on your credit score.
Through a suite of educational materials, free monthly newsletters, and easy-to-use products, TrueCredit.com empowers consumers to achieve greater financial well-being. TrueCredit.com's online products include credit reports, insurance and credit scores, credit monitoring, debt management tools, and identity theft insurance services. For more information, visit: TrueCredit.com.© 2008 Elena Laramie
The views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal, financial, or medical professional.