Do Credit Inquiries Hurt You?

At the end of each report will be a log of inquiries. An inquiry notation is made each time someone requests a copy of your credit file from that credit bureau. Any company that receives a copy of your credit profile will be listed under this inquiry Section of your report.

Lenders don't like to see a lot of inquiries on a credit report. Excessive inquiries can result in a credit denial as easily as bad credit. Thus, you will need to verify the type of inquires made and take steps to remove any unauthorized inquiries. Not all inquires are viewed negatively. In fact several types of inquires will not appear on any copy of your file except for the copy you
receive.

There are six origins of inquiries:

* Your Existing Creditors (okay)

Your existing creditors may do a periodic review of your account for many reasons. These inquiries are not viewed negatively.
* Yourself (okay)

A notation may be made each time you request a copy of your own file. This notation does not appear on the copy that goes to your potential lender and does not count against you.
* The Bureau (okay)

The bureau may compile mailing lists for its subscribers based on the criteria that the lender specifies. Your report may be reviewed as a candidate for a particular mailing list. Again, these internal inquiries do not appear on the copy that goes to your potential lenders and therefore do not reflect negatively.
* Potential Lenders (negative)

Lenders do not have to have your permission to obtain a copy of your credit file. The law only requires that they reasonably expect to use the information in a credit transaction. Any member of the bureau can obtain your file. All they need is a social security number or a name and address. You should be cautious about giving out any such information until you're serious about doing business.
* IRS (negative)
* Anyone who has a judgment against you (negative)

The most common inquiries are those by lenders with whom you have applied for credit. A banker will look at them in one of two ways. If they are recent, they are looked at as potential debt pending approval. Lenders have no way of knowing the status of these other pending applications and are likely to take the safest action by denying your application. If they are more than a couple of months old, it looks as if they turned you down. If there are several previous declines, the banker has to wonder why.

Although inquiries will remain on your file for up to 2 years, those in the last 6 months will count most heavily against you. Therefore, you should review the log to make certain that each inquiry was done with “permissible purpose” as explained in Section 604 of the Fair Credit Reporting Act (FCRA).

The FCRA defines the “permissible purposes” for which consumer credit profiles can be provided to others. A credit report may be supplied if it's to be used for:

* credit granting considerations;
* review or collection of an account;
* employment considerations;
* insurance underwriting;
* application for a government license;
* with your written permission;
* in response to a court order;
* or a *FBI investigation.

*Changes to the FCRA, enacted in 1996, allow the FBI to access consumer credit reports in connection with an investigation of issues such as counterintelligence.

Unless someone fits these categories, they should not be viewing your credit file. Anyone who knowingly and willfully obtains a credit report under false pretenses may be fined under title 18, United States Code, and imprisoned up to two year.

Use letters to dispute any unauthorized inquiries into your credit file so that they can be deleted form your report. If you don't have a lot of items to dispute, go ahead and send your letter to the credit bureau. However, if you know you are going to be sending the bureau several letters on other items over the next few months, you should try to take care of this with the creditor who requested your file. If you can take care of it by having them contact the bureau directly and deleting the request, then it is just one less letter you will have to send to the bureau yourself.