What a Credit Inquiry is and Fixing Unauthorized Ones

By Aaron Crowe

Too many inquiries into your credit report can lower your credit score, which can make it difficult to be approved for credit or get good interest rates on loans. But at least those inquiries are usually done at your request because you’re applying for credit.

Unauthorized credit inquiries, however, are a sign that someone has applied for credit in your name fraudulently. They can hurt your credit score too and can make your financial life more difficult until they’re removed from your credit report.

Defining a credit inquiry

A credit inquiry is a record that your credit report was accessed because you submitted a credit application somewhere.

An inquiry indicates you may have acquired new debt that doesn’t yet appear on your credit report, which can worry potential creditors.

Inquiries can lower your credit score, though usually not by much. Having many applications out within a short period can be seen as a sign that you’re having financial problems and need credit to stay afloat, or to live beyond your means.

The potential drop in a credit score from multiple inquiries is small when compared to other negative factors such as late payments or having high balances. An inquiry by itself should never lead to an application being declined.

The Fair Credit Reporting Act defines who can be granted legal access to your credit. These include you, a court order if you’re alleged to have caused credit damage, debt collectors, lenders, employers (with your permission) and insurance underwriters.

Types of credit inquiries

There are two types of credit inquiries: Soft and hard.

Soft inquiries don’t affect your credit score. They aren’t seen by lenders and only show up if you’ve requested your credit report.

Other types of soft inquiries are when your current lenders pull your credit reports so they can manage your accounts, or when the information is sold to lenders for pre-approval credit card offers.

Hard inquiries can hurt credit scores. The most common type is when a credit report is pulled during a loan application. Hard inquiries can only stay on a credit report for 12 months.

Unauthorized credit inquiries

Hard and soft credit inquiries are the ones you have control over as a consumer. You either asked for a credit report to be pulled so you could view it, or you applied for a loan or allowed someone else to view it.

Unauthorized credit inquiries can lower credit scores faster, simply because your credit is being used fraudulently by someone who can use it to run up a lot of charges quickly or do other things that could hurt your credit.

Checking your credit report often, such as for free every four months through one of the three main credit bureaus, can help you spot unauthorized inquiries.

But not recognizing a name on the inquiry doesn’t mean you’ve had your credit information stolen. It could be a collection agency that has pulled your report, which is one of the few times when your permission isn’t needed to get access to your credit report.

Removing unauthorized credit inquiries

If you think your credit reports have been accessed without your permission, you can have the unauthorized inquiries removed.

Start by disputing them with the three credit bureaus. If you think fraud is involved, make that clear in your dispute because credit bureaus must respond to those types of issues quickly.

If you think your personal information has been stolen by an identity thief who is trying to apply for fraudulent accounts in your name with unauthorized credit inquiries, ask the credit bureaus to put a security freeze on your credit reports.

The Consumer Financial Protection Bureau says that each state has its own rules about credit freezes and how much consumers must pay for them. It also provides phone numbers for the credit reporting companies Equifax, Experian and TransUnion to request a security freeze.

The credit freeze will take your credit reports out of circulation and won’t allow lenders that you don’t have a relationship with to access them.

Looking out for unauthorized credit inquiries is always a good idea. Legitimate inquiries can be worth limiting, however, so that your credit score doesn’t drop because potential lenders are worried that you’re in danger of overextending yourself.

If you’re planning to buy a home or car soon and are relying on a good credit score to help you get the best loan terms available, then you may want to rethink applying for a new credit card or a few credit cards at the same time.