Home > Credit Reports > The Most Misunderstood Part of Your Credit Report

Comments 6 Comments

If you’ve checked your credit reports or reviewed your credit scores recently, you probably noticed the section of your credit report called “inquiries,” which lists the names of companies that have reviewed your report recently.

While most consumers are generally aware that these credit checks can affect their credit scores, they often still find the topic of inquiries confusing.  For instance, one of our readers, “Chuck,” recently wrote:

I’ve seen many articles explaining how soft inquiries don’t negatively affect your credit score. But I never saw a clear explanation of what exactly a soft inquiry is? Meaning, what info does the credit bureau provide to those who make soft inquiries? Do they just verify the name/DOB/address, or do they tell the Inquirer how many credit cards I have and if I ever missed a payment etc.? Is the exact same info furnished to a soft Inquirer as to a hard Inquirer?

Chuck isn’t the only one who isn’t sure he really understands this topic. Here are three questions you may have about inquiries.

Why Do Credit Reports List Inquiries?

Consumers sometimes ask us why inquiries are reported at all. In fact, federal law requires it. Under the federal Fair Credit Reporting Act, when a credit reporting agency provides a consumer with a copy of her credit report, it must include identification of anyone who received the report in the previous two years for employment purposes, or one year for any other purpose.

Does an Inquiry Count Against Me?

While you must be shown all recent inquiries when you receive your own credit report, the same isn’t true of reports supplied to lenders or other companies that request your reports. Certain types of inquiries are shown only to you, and not to others, and therefore they don’t affect your credit scores. These are often described as “soft” inquiries and include those associated with promotional or pre-approved credit offers, as well as those generated when you check your own credit reports. Other inquiries that don’t affect credit scores include for employment and insurance purposes.

“Generally an inquiry for new credit or more credit is a hard inquiry,” says David Blumberg, public relations director for TransUnion.  “A review of existing credit would be a soft inquiry.”

But there are few situations where the inquiry can go either way, and you may not always know which way it will go. For example, if your credit card issuer reviews your credit report periodically to determine whether you qualify for a rate increase, the inquiry that results is an “account review” inquiry and it won’t affect your credit scores. But if you call your card issuer and request a credit line increase, it may be a different story.

“It’s a bit of a gray inquiry when you call and request a credit line increase but usually it’s a hard inquiry because you are initiating a transaction,” says Rod Griffin Experian’s director of public education. “Essentially it’s an application.” He goes on to explain: “The creditor reports the inquiry type code at the time of the inquiry. It represents the user’s permissible purpose under the FCRA for making the credit report request.”

Can I Dispute Inquiries?

Yes. But don’t automatically assume that just because you don’t recognize the name of the company that checked your credit, that it’s fraudulent.

Keep in mind that companies with a “permissible purpose” for obtaining your credit reports — an application or review of credit or insurance, for example — don’t have to get your written permission first. Only employers do.

Nevertheless, if you are concerned your credit report was accessed fraudulently, you can request the address and telephone number of the company that checked your credit so you can look into it, and if necessary, dispute it. As with all credit report disputes, the credit reporting agency must typically verify the information you question within 30 days. Here’s how to dispute mistakes on your credit reports.

As for Chuck’s question about the difference between the type of information provided for soft and hard inquiries, there’s not necessarily a distinction those in the credit industry would make. Hard and soft inquiries “are not formal industry terms,” Griffin says. “They are terms used colloquially.” And creditors “can’t get a score without a report.” They may not always review the full report, but it is available to them.

An exception? In the case of pre-approved offers, it’s unlikely the creditor ever reviewed your information, Griffin explains. Instead, the creditor requests a list of consumers that meet specific criteria for a targeted offer and the credit reporting agency supplies the names and addresses of those that passed this “pre-screening” directly to a mailing house that sent a pre-approved offer. If you don’t want to receive these kinds of offers, you can opt easily out.

How Do Inquiries Affect Your Credit?

While inquiries don’t typically have a major impact on credit scores, they can count. You can find out how they affect your credit by obtaining two of your credit scores and a breakdown of your credit data for free from Credit.com. If it turns out that recent inquiries are bringing down your scores, you may want to hold off applying for credit until the ones on your report are at least a year old.

Read more: Should You Be Worried About Credit Report Inquiries?

More on Credit Reports and Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • William

    Hi Gerri, When the cell phone carriers, dish networks or internet providers pull your credit is that considered a “soft ” or ” hard” inquiry?

    • http://www.credit.com/ Credit.com Credit Experts

      William —
      Those would generally be considered hard inquiries, yes.

  • http://www.Credit.com/ Gerri Detweiler

    No, not at all. But in your dashboard, you will see a tab for loans and another for credit cards, and those will show offers from lenders.

  • http://www.Credit.com/ Gerri Detweiler

    That’s a good tip Kevin. Also keep in mind that consumers to get a free credit score through Credit.com will also get matched to offers from lenders looking for applicants with profiles similar to theirs.

  • http://www.Credit.com/ Gerri Detweiler

    Inquiries are reported for two years but most scoring models are most interested in those in the past year. We talked about that here: Should You Be Worried About Credit Report Inquiries?

  • http://www.credit.com/ Credit.com Credit Experts

    Good suggestions. Thanks for sharing.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team