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Inquiries without a permissible purpose can be removed

erase_credit_inquiries
Credit inquiries can remain on a credit report for 2 years. There are two types of credit inquiries – one impacts your credit score and one does not.

The two types of credit inquiries are a hard inquiry and a soft inquiry.

A soft inquiry occurs when you pull your own credit report or a creditor pulls your report to see how you are paying other obligations which is known as an “account review.” Soft inquiries do not impact your credit scores. You can pull your credit report as much as you like and it will not impact your credit score. Potential creditors looking to send you offers in the mail can also “soft inquiry” your credit report if you have not opted out.

Hard inquiries affect your credit score and can remain on your credit report for 2 years. Hard inquiries occur when you apply for credit or insurance and when a creditor or debt collector claims they have a permissible purpose for pulling your report.

If a debt collector has pulled your report you can guarantee they are looking to see how they can collect an outstanding debt.

Erasing credit inquiries

The credit reporting agencies will tell you that credit inquiries are just a statement of fact and cannot be removed. This is not true. FCRA Rules state that any information can be disputed and must be investigated. You need not worry about soft inquiries as they do not count against your credit score.

Credit inquiries made without “permissible purpose” can be removed. Additionally, the FCRA states you can sue for damages in the amount of $1,000 for each instance a company pulled your credit report without your permission.

Credit inquiries made without your permission can indicate fraud; in which case the credit reporting agencies may put a fraud alert in your files. A fraud alert will make it difficult for anyone, including you, to access your credit report without your permission.

Dispute the Inquiry with the Source

If an inquiry has occurred without your permission or is unauthorized it is best to contact the creditor or collection agency and ask them their “permissible purpose.” You can also dispute the inquiry with the credit reporting agency but disputing the inquiry with the source usually works better. Here is a sample requesting removal of a hard inquiry.

Pre-Approved Offers

When you receive a “pre-approved” offer in the mail, this means a bank or credit card company has screened your credit and made a soft inquiry. However, even when you receive a pre-approved credit offer in the mail and you respond, a hard inquiry will most likely be pulled. This means a hard inquiry will be added to your credit files and points will be deducted from your credit score.

Hard credit inquiries can be harmful

Credit grantors view too many credit inquiries as a sign of financial trouble. A creditor has no way of knowing if you were approved for all of the credit showing where you applied. Credit inquiries do not indicate approval or denial. They may assume you received the credit lines that are showing as inquiries. Additionally hard credit inquiries take away points from your credit score. Too many hard inquiries could result in a denial of credit and bring down your credit score.

Mortgage and Auto loan inquiries

It is wise to shop around for the best interest rates when making a major purchase such as a house or automobile. All credit inquiries related to finding the best mortgage loan rate will count as one credit inquiry as long as they are done within a “30-day period.” If the lender is using the newest version of FICO credit scoring, FICO 8, mortgage rate shopping allows a 45-day period for all inquiries related to rate shopping to count as one.

All credit inquiries related to finding the best car loan interest rate will count as one credit inquiry as long as they are completed within a “14-day period.”

You may want to make sure the credit bureaus properly report mortgage loan and car loan credit inquiries. When shopping for a car loan a dealership may run your credit through many lenders in order to get you approved. If each credit inquiry shows up on your credit report, this would definitely lower your credit score.

How long do inquiries remain on your credit report

All credit inquiries remain on your credit report for two years and should drop off automatically when the two years as expired. Hard inquiries hold less weight on your credit score after 12 months.

Is disputing credit inquiries worth the time

If the credit inquiry is really a mystery and you don’t recall requesting credit then you should definitely initiate an investigation with the credit reporting agencies. It could be a matter of fraud which should be handled immediately. A fraud alert may be put in your files in order to protect you. But keep in mind, fraud alerts will also keep you from applying for credit easily and they can be very cumbersome to deal with.

Disputing credit inquiries that actually belong to you may prove detrimental to your credit accounts. You run the risk of your accounts being closed due to fraud.

Credit inquiries remain on your credit reports for 2 years but after 12 months they are not heavily weighed in decisions to grant credit and are not being used to calculate your credit scores. Your time may be better spent disputing other types of information that would significantly raise your credit score if deleted.

What the FCRA says about Permissible Purpose

Here is a partial section of the Fair Credit Reporting Act (FCRA) that governs what is “permissible purpose.”

§ 604. Permissible purposes of consumer reports
[15 U.S.C. § 1681b]

a. In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
1. In response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.
2. In accordance with the written instructions of the consumer to whom it relates.
3. To a person which it has reason to believe
A. intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or
B. intends to use the information for employment purposes; or
C. intends to use the information in connection with the underwriting of insurance involving the consumer; or
D. intends to use the information in connection with a determination of the consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status; or
E. intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation; or
F. otherwise has a legitimate business need for the information
i. in connection with a business transaction that is initiated by the consumer; or
ii. to review an account to determine whether the consumer continues to meet the terms of the account.

Complete FCRA here

4 Comments

4 Comments

  1. Brandye

    May 17, 2017 at 10:06 pm

    Shopping for a car. A single Dealership ran my credit excessively (11times) with one bearu and 17 with another. Each lender is showing up, which has hurt me. Would this be something I can dispute?

    • Lisa Phillips

      June 22, 2017 at 4:56 pm

      An auto dealership will typically submit a car loan application to multiple lenders to find the lowest interest rate for the customer or to find a lender that will finance a customer. This practice is commonly referred to as “shotgunning.” When a car dealership “shotguns” a loan application, they send it to multiple lenders. In turn, this practice enables lenders to compete for the loan and for the car dealership to help their customer find the best loan terms.

      Unfortunately, customers don’t always know signing one credit application can result in a dealership “shotgunning” a car loan application to multiple lenders. Essentially by signing a car loan application, you are giving the dealership a “permissible purpose” to run your credit multiple times.

      The good news is that credit inquiries that occur when you are “rate shopping” should only count as ONE inquiry as far as your credit scores are concerned. If done correctly, it should have very little negative impact on your credit scores although each lender will show up on your credit reports. The FICO Scoring system counts all inquiries related to getting an auto loan within a given period of time as a single inquiry.

      But the time period for rate shopping can differ depending on what FICO Scoring version is used by a particular lender. Here is a breakdown of the time period for multiple inquiries to be counted as ONE inquiry on the different versions of FICO Scoring:

      • FICO ’98: 14 days
      • FICO ’04: 30 days
      • FICO ’08: 45 days

      Keep in mind, each lender chooses which version of the FICO scoring formula it wants the credit bureau to use to calculate your FICO Scores. Currently the typical time-frame is 14-days because most lenders are still using the older version of FICO for auto loans.

      All the inquiries you mentioned, if done within a 14-day period, should count as ONE inquiry and not hurt your credit score. However, the inquiries will show up on your credit reports from each lender that ran your credit.

      However, even with the provision FICO makes for shopping for a car loan, the system does not always work as it should for scoring purposes. You may need to dispute the inquiries. In this situation you would request the credit bureaus count any inquiries related to car shopping as ONE inquiry.

      Even if you shopped for a car over several months, the FICO Scoring System should look on your credit report for auto loan inquiries older than 30 days and if they fall within a typical shopping period, count them as just ONE inquiry.

  2. doug donato demartini

    March 27, 2017 at 10:57 pm

    Can this also work for inquires on my Chex Systems report?

    • Lisa Phillips

      March 28, 2017 at 10:58 pm

      If the inquiries are a result of you NOT applying for a bank account, that is considered fraud and you may be able to get the inquiries deleted. However, if the inquiries are a result of the bank where you had an account pulling your ChexSystems report, then that is considered legitimate.

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