As part of their risk assessment and underwriting process, lenders always access applicants’ credit reports. This is formally called a credit inquiry. A credit inquiry is a record that shows that a credit bureau gave an individual or company access to your credit information. You can request a credit inquiry yourself, or your bank can request your report when you are applying for financing. The report can also be requested when you are applying for insurance or a new job.
You can access information on who accessed your credit report through credit reporting agencies like Equifax, TransUnion, and Experian. The Fair Credit Reporting Act (FCRA) requires that a creditor’s employment-related inquiries stay on their report for at least 24 months while non-employment matters must stay on the report for 12 months.
What is a hard inquiry?
Hard inquiries are made by financial institutions that offer credit facilities. These can be lenders or credit issuers to check creditworthiness and make lending decisions. Hard inquiries are made when you apply for a credit card, loan, or mortgage.
Many hard inquires within a short period of time can be a worry to lenders. This is because many hard inquiries may mean new accounts. Borrowers with too many accounts may be having trouble paying their bills. Hard inquiries may, therefore, hurt your credit score.
What is a Soft Inquiry?
A soft inquiry is when you check your credit report or give permission to another person to review your report. This type of inquiry can be made by insurance companies, lenders, or credit card companies before approving you for a certain offer. These inquiries are not attached to any specific application; hence they do not affect your credit score.
Managing Your Credit Inquiries
There are a number of steps you can take to manage your hard inquiries.
- Apply for credit only when you need it
- Do enough shopping when applying for an auto loan or mortgage
- Check your credit report regularly to ensure all available hard inquiries are the ones you initiated.
- Manage other factors that affect your credit score.