Credit Inquiry

Definition:

A credit inquiry is a request made by a lender to a credit reporting agency for information about a borrower’s credit history. This information is typically used to assess a borrower’s credit worthiness and credit capacity.

Types of Credit Inquiries:

• Soft Inquiry: This is a inquiry initiated by the borrower themselves or by a lender with the borrower’s consent. It does not affect the borrower’s credit score.
• Hard Inquiry: This is an inquiry initiated by a lender without the borrower’s consent. It typically occurs when a lender applies for a credit report for credit scoring purposes.

Information Covered:

A credit inquiry typically includes the following information:

• Credit history summary
• Payment history
• Account balances
• Credit utilization ratio
• Length of credit history

Purpose:

Credit inquiries are used by lenders to:

• Assess credit worthiness
• Determine credit capacity
• Set interest rates
• Make credit decisions

Impact on Credit Score:

Hard inquiries can negatively impact a borrower’s credit score, particularly if they occur frequently. However, soft inquiries do not affect the score.

Consumer Rights:

Consumers have the right to request a copy of their credit report, dispute inaccurate information, and opt out of unwanted solicitations.

Examples:

• When you apply for a credit card, the lender will conduct a hard inquiry.
• If you check your own credit report, it will be a soft inquiry.
• If a landlord checks your credit report, it may be a hard inquiry.

Additional Notes:

• Credit inquiries can be made through the three major credit reporting agencies: Equifax, Experian, and TransUnion.
• Lenders may use different criteria to weigh credit inquiry information when making lending decisions.
• It is important to maintain a positive credit history to minimize the impact of credit inquiries.