Professionals hire pulling services to supply them with merged credit reports, showing a credit history from each of the three credit bureaus, with one FICO score per bureau that represents the risk level of each. Most lenders take the middle of these three scores which is used to define the applicant’s ability to get approval for a loan and the interest rate that will apply. Each credit review is considered a hard pull or inquiry.
When consumers purchase their own credit scores and reports online, the request is considered a soft credit inquiry does not impact the scores at all. Also, promotional pre-qualified/pre-approved credit card pulls initiated by the issuer are considered soft pulls and do not impact scores.
Every time a consumer goes to a 3rd party to apply for a credit card, credit limit increase, overdraft on a checking account, mortgage application, line of credit, car loan, student loan, and most financing, a view of the individuals credit occurs by the potential creditor.
This view is called a hard inquiry – when a consumer authorizes a third party to pull their credit scores/reports. This type of inquiry does have an impact on credit scores.
For mortgages, auto and student loan inquiries, there is a window of time that MyFICO allows a group of credit inquiries for individuals shopping around for the best rate. FICO indicates on their website that the window is about 30 days. Consumers should keep in mind that the impact of this credit window will also depend on the state of your credit and number of inquiries prior to loan shopping. Excessive inquiries can cause credit scores to drop below the best rate threshold, so consumers should consider their scores and time frame before starting to shop for a loan. It’s important to understand that this rule varies based on the version of FICO scores that your lender is using – the impact also depends on your unique credit profile and the average age of credit history.
Credit card inquiries initiated for credit limit increases and new credit card approvals, are all considered hard inquiries and can reduce the score depending on the current state of the credit. On that note, many credit card companies will do “promotional credit card inquiries” this is considered a soft pull and will not hurt credit.
Reviewing inquiries on your credit profile help you
Every time a third party looks at your credit it is usually for the same few reasons. The first is for the approval of an application of a credit card, loan, or lease. The second could be to increase a limit on a credit card when a request is made. For those of us who do not monitor our credit regularly and are concerned about identity theft, these inquiries reveal information that can help. If you are suspicious that identity theft has occurred, pulling a copy of your credit reports and reviewing the latest inquiries will help determine if there is unauthorized activity occurring on your credit. If a thief tried to open credit in your name, the creditor would have pulled your credit reports to review your risk level. If you see any hard inquiries that you do not recognize call the number associated with them and ask if an application was placed in your name. Of course, reviewing the accounts and addresses on your credit will also be a big help, but sometimes it may be too early in the process since accounts may have just been opened and not yet placed on credit. Since the inquiries are the first step in the approval process they are a great indication of potential fraud.