Inquiry Dropped Credit Score by Another 5 Points

It’s not much but it adds up! When a creditor or solicitor looks at your credit there are a number of codes that they must fill out to request your credit report. Those codes indicate to the credit bureau why a company is looking at your credit. If used correctly, those codes are designed to indicate whether a consumer is actively seeking credit, more credit, employment, insurance etc. or simply being used to solicit and offer credit. The codes, developed by the credit bureaus themselves help score your creditworthiness.

Typically there are two types of credit inquiries you see on your report depending on the code the creditor uses when they request your credit. One, often referred to as a “hard pull” counts against your credit score. Hard inquiries are supposed to indicate that you are actively seeking credit. These are the inquiries that will start to reduce your score about 5 points each after 3-4 inquiries in a year. The other type of inquiry, often referred to as “soft pulls” should be those that are requested to make financial offers, make solicitations and used for marketing and informational purposes only. These are generally not known by the consumer. These will not count against your credit score according to the credit bureaus.

Fair Isaac Corporation on MyFICO.com, home of the most used FICO score says, “…only inquiries that count toward your FICO score are the ones that result from your applications for new credit.” Well that is not always entirely true. In my case, my second mortgage company pulled my credit but I had not initiated any further credit from them nor had any issues with paying my account. I found that their inquiry dropped my score by at least 5 points and was classified on my report as an inquiry that impacted my credit score. The mortgage company was simply doing a random review but I was docked points as though I was seeking more credit. What happened is that the mortgage company filled out a form and selected a purpose code for them to pull my credit when submitting their request to the credit bureau. Here’s the problem. The type of inquiry selected rests entirely with the accuracy of the code selected by the creditor and at times the integrity of the code selected is subject to personal choice and human judgment. In this case, I wrote to the mortgage company and said they had harmed my score by their inquiry and to please remove it since I believed their pulling my report “ to only review” was misleading the scoring model into determining I was seeking more credit.

They wrote back saying , “Please note that as servicer of your loan, we are authorized to perform inquiries on your credit report. However, pursuant to your request, we have submitted an update with the credit bureaus to remove credit inquiry (if any) made by us on your loan. “

They were right, the Fair Credit Reporting Act allows them to review my credit at anytime. It is the scoring models of the credit bureaus that determine why my credit is being reviewed and whether or not my score will be harmed from such an inquiry. We are at the mercy of whatever code a creditor selects to get the report. It’s highly unlikely the creditor knows which code will harm a score and which won’t normany even care or think about it. Some creditors may just standardize their selection for all their credit inquiries where requests for information are harmful despite whether or not the consumer asked for credit.

While your score may not lower significantly at first, it is nonetheless a lower score and even 5 points can mean the difference in the interest rate you get on any credit you borrow. Your solution? Be diligent and make sure any inquiries that show up on your report are legitimately there because you asked for credit. If not, contact your company directly and ask them to remove the inquiry or recode the inquiry because they mislead other potential creditors into thinking you are seeking credit when you are not. Disputing inquiries with the bureaus themselves will rarely change your report as it is the creditor that leads the bureaus to classify the inquiry as they do.


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Consumerwarfare.com
October 4, 2010