What is a Credit Inquiry?

One of the most confusing credit report components is the credit inquiry.  Inquiries are added to your credit report when a company (or anyone else) obtains a copy of your credit report.  This can include banks, credit unions, insurance companies, and even you.

Inquiry information includes the company that made the inquiry, the date of the request and the type of company – bank, retailer, mortgage company, etc.  By law, current and prospective creditors and employers can review your credit report. This information remains on your credit report for up to 24 months.

There are two types of inquiries, hard and soft.  Hard inquiries are mostly initiated by you when you apply for a credit card (retail or bankcard) or loan, such as a mortgage, home equity line or auto loan.  Even shopping for a car or mortgage creates an inquiry.  And, collection agencies can also pull your credit reports and their access will be hard inquiries.  Hard inquiries from the last 12 months are considered in your credit score and can negatively impact it.

It is important to shop for a mortgage or car loan within a month or two and not spread it out over months.  Credit scores, FICO in particular, ignore auto, mortgage and student loan inquiries for the first 30 days on file, and combine mortgage, auto and student loan inquiries as “one search” for each 45 day period thereafter, for up to one year. This means that even if you shop for a car at four dealerships within one month, these will count as one inquiry instead of four inquiries.

Soft inquiries include those initiated by you or by a business with whom you have an existing relationship or one that is attempting to solicit you for business.  When you request a copy of your credit report or monitor you own credit this creates a soft inquiry.  Soft inquiries are not considered in credit scores and are not counted against you because you are not actively seeking credit.  Consider soft inquires to be “invisible” to the world except for your eyes.

Soft inquires include account monitoring, account review, promotional, consumer reviewing file, credit counseling, medical, insurance, companies trying to locate you, employment and utilities.  Account monitoring involves creditors reviewing your credit report for payment changes on a periodic basis, monthly in most cases.  Creditors conduct an account review to determine whether or not to renew your credit card or even increase your credit limit. Promotional inquiries occur when a creditor or insurance company reviews your credit report and purchases your name and address to offer you credit or insurance.

Inquiries for insurance and employment are not counted against you…ever.  And, you have to give written permission to allow these businesses to view your credit reports. Soft inquiries are not displayed on the credit report and thus cannot be seen by creditors.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.

Categorised in: Credit Report, Credit Score, Improving Credit

This post was written by John Ulzheimer