The Most Misunderstood Part of Your Credit Report

By Steven Shaw on 9/2/2014

Credit Score

The Most Misunderstood Part of Your Credit Report

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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 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?

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