Can Anyone Pull Your Credit Report?

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You might be worried that your credit history is an open book. Let’s see whether that’s a valid concern.

It’s a bit unpleasant when you think about it. A person you’re barely acquainted with -- if at all -- will be scrutinizing your credit history when you apply for a new credit card, bank loan, or any one of numerous credit instruments.

It must be easy, then, to glean this information. So is it child’s play for the average Joe Criminal or Bob Vengeful to grab your credit report and use it for their own twisted ends?

Let’s look into that, and while we’re at it explore other dimensions of who can peer at your data, how much they can see, and when they can see it.

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Who can check your credit report

In short, don’t worry much. Basically, a person or organization is only allowed to pull your complete report if you have one of several kinds of legal or business relationship with them, or might in the future.

These limits are established firmly in federal law, specifically the Fair Credit Reporting Act (FCRA), and are addressed in certain state regulations. Essentially FCRA stipulates that your information can be released by the credit reporting agencies only to people and organizations that have what it calls a “permissible purpose.” Those purposes include, but are not limited to:

Court proceedings -- Credit bureaus must comply with all court orders or subpoenas.

Credit decisions -- This is the main category; banks and credit card issuers need to know how you handle credit in order to decide on a loan or credit card application you’ve made.

Potential employment -- Along the same lines, some would-be employers feel a good credit history indicates some level of responsibility.

Child support decisions -- Credit reports help state and local child support enforcement agencies figure out how much child support a parent might be able to afford.

It’s important to note that in several instances, the person whose credit history is desired must give explicit consent to the requester. This is the case with two of the major purposes mentioned above, credit decisions and potential employment (in fact, the only time written consent is required is with the latter).

If this consent is not obtained, the requester is not legally permitted access to the documentation.

Legal remedies for violation

The credit reporting agencies expose themselves to legal liability if they don’t comply with FCRA and related state law. So they tend to toe the line and release credit reports to those entitled to them. If they didn’t follow the law it would be bad for their business, not to mention their relations with the public.

Nevertheless, there is always the possibility of error or malfeasance. Should either rear its ugly head, the violated party can sue the credit reporting agency and/or the person/organization pulling the report. The plaintiff will have to demonstrate that s/he suffered harm from the action.

If the court finds for the plaintiff, s/he could be awarded one or several forms of damages by the defendant and be compensated for their lawyer costs and fees.

Care should be taken when considering such a lawsuit. Filing one that is subsequently found to be frivolous could result in a penalty being levied by the court. A qualified attorney will advise whether s/he believes you have a valid case.

How is a credit inquiry made?

Valid parties with permissible purpose considering a loan or other financial instrument for you obtain your full credit profile through what’s called a “hard inquiry.” With this report’s depth and detail, they’re armed to make an informed decision as to whether you get that mortgage, or are awarded the credit card you want.

However, you need to be aware that hard inquiries can and do affect your credit score, although this is nowhere as serious as some cautionary tales would have you believe. One of the big credit reporting agencies, Experian, says that a FICO® Score tends to be reduced by five to 10 points for a hard credit inquiry.

Hard checks stay on your credit profile for roughly two years, but usually affect your score only for a year or so.

That point penalty isn’t a large amount. Plus, if a number of hard inquiries are made within a relatively short period of time -- two weeks appears to be the standard, although this depends on the particular credit reporting agency -- they are considered to be one inquiry.

Why? Because the assumption is that the consumer is essentially shopping around for the lowest rate he or she can find -- as opposed to suddenly applying for millions of dollars in credit in one desperate burst.

Pulling a more abbreviated, less detailed version of your credit profile -- generally for the purpose of a background check -- is called a “soft inquiry.” Besides the amount of information provided, there are two key differences between this type and its hard cousin, namely:

Lending decision -- There is no lending decision involved in a soft inquiry. What’s behind it is rather a request for basic information.

Credit score -- It doesn’t affect this at all.

Many types of credit profile dives are characterized as soft inquiries, some of which we’ve already mentioned. Falling into this category are credit checks instigated by:

  • Current or potential employers
  • Landlords
  • Yourself (in order to monitor your credit history and score; more on this below)

Another type deserves a bit of attention on its own. This is the “pre-qualified” credit card, loan, or insurance product. This comes when a provider makes a soft inquiry on your profile and determines from this that you would be a safe gamble to get their product. As promised you can often win “approval in minutes!” since a soft inquiry can be effected quickly.

Monitor your credit profile!

The one entity that should not only ping your credit, but do it on a constant basis, is yourself.

“But why is it important to check your credit report?” I can hear you asking.

For numerous reasons. It’s obviously a means for tracking the all-important FICO® Score, but in keeping with our theme it’s also by far the best way to monitor who’s made a hard inquiry on your report.

When checking this information, make sure each derives from a direct application you made for a credit product. If any don’t, notify the credit reporting bureau and they’ll guide you through what you should do next.

Monitoring your credit profile isn’t hard, and can even be done for free.

Each of the three credit reporting agencies (Experian, TransUnion, and Equifax) are legally required to provide you with one report gratis every year. Time those requests several months apart to get a sense of how your profile is developing.

Meanwhile, it’s becoming more common for credit card providers to offer free credit monitoring services. Many of these services can be accessed online, within the card’s account management portal. Often this information is also included in the digital and paper statements for the account.

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