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What Is A Credit Inquiry: Everything You Need To Know

what-is-a-credit-inquiry

Credit inquiries are requests for information that lenders send to consumer reporting agencies (CRAs) when potential borrowers apply for credit. A credit inquiry also referred to as “Credit pulls” or “credit checks” helps lenders to verify a borrower’s identity and determine whether they qualify for a loan or credit card.

Landlords and potential employers also have the ability to request access to your credit file to help them get a quick overview of whether you’ve been using your credit responsibly.

There are multiple consumer reporting agencies that provide credit reports and other information about consumers but the main CRAs are:

You are entitled to review the information contained in your credit report that is requested by lenders. Find out how to get your free credit reports.

What Are Credit Inquiries?

Credit inquiries are requests made by lenders to one or more of the three major credit reporting agencies (Equifax, Experian, and TransUnion) asking them to check your credit report. These inquiries are usually triggered when you apply for a loan or credit card.

Why Do Companies Ask About My Credit History?

If you apply for a new job, you might receive an inquiry about your credit history. This is because companies need to make sure that you will pay back any loans you take out. They also want to make sure that you won’t default on any other debts.

Can you perform a credit inquiry?

Checking your own credit report is important to keep track of the information on your credit reports. In fact, self-credit pulls could help improve your score if you discover credit errors that need to be disputed or need to repair your credit.

Types of Credit Inquiries

There are two types of credit inquiries: Hard Inquiry and Soft Inquiry.

  • Hard credit inquiry occurs when you apply for a loan or credit card. A hard credit inquiry can stay on your credit report for about two years but stops affecting your score after about 12 months.
  • Soft credit inquiry occurs when a lender wants to determine your creditworthiness before you actually apply for credit. It provides a quick way to see if you’ll qualify for a loan or credit card.

The biggest difference in a hard and soft inquiry is that a hard inquiry takes points away from your credit score while a soft inquiry doesn’t affect your credit score at all, so there’s no downside if one is performed. Checking your own credit report will not take points away from your credit score at all, just like a soft credit inquiry/.

Some situations where a soft inquiry is performed include:

  • Getting pre-approval for a mortgage
  • Getting pre-approval for a credit card or line of credit
  • Checking your credit score
  • Undergoing some employer background checks

Find out what you can do if a credit report is pulled without your permission. You can also freeze your credit reports to ensure they are not pulled without your permission.

What happens when you apply for credit at multiple lenders

Multiple credit card inquiries can hurt your credit score and raise a red flag for future creditors.

You may want to take advantage of various like welcome bonus offers when applying for credit cards but  it could have negative consequences for your credit score. Each credit card account you apply for will result in a separate inquiry, and each will factor into your credit score.

However, when you shop around for a mortgage, auto loan or even private student loan in a short period—typically 14 to 45 days depending on the credit scoring model—all the hard inquiries that appear on your credit reports will count as just one when calculating your credit score. That’s because it’s common to get quotes from multiple lenders to ensure you’re getting the best terms.

Why does a credit inquiry matter?

If you’re applying for a credit card, mortgage, personal, student or car loan, you are taking on a new financial responsibility. Applying for a new apartment is also a financial responsibility. A credit inquiry helps to determine whether or not you’re likely to be a financial risk or default on an obligation.

When employers check your credit, they’re likely looking to see if you’re a responsible person. Employers are more likely to run a credit check for candidates applying for financial roles within a company or any position that requires handling of money but employers also check your credit for security purposes to verify someone’s identity, background and education, to prevent theft or embezzlement and to see the candidate’s previous employers.

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