Only certain persons and organizations are allowed to pull your credit for specific reasons. As it turns out, however, the reasons and persons are numerous. The rules that govern who can and cannot pull your credit are set forth in the Fair Credit Reporting Act (FCRA).
Unfortunately, in many cases, people can successfully pull your credit when they shouldn’t be authorized to. The checks and balances sometimes fail, so it’s up to you to question inquiries that seem improper and to know what should and shouldn’t be allowed. Most of the time, when your credit is pulled, companies are supposed to get your permission, so it’s worthwhile to note when a credit inquiry happens without this.
Here are some examples of cases in which inquiries are permitted by law.
Banks and Lending Institutions
If you’re seeking any kind of loan, lenders will pull your credit to determine what kind of risk you are and to assess your debt-to-income ratio. A good credit score will help you qualify, as well as give you the best interest rates. If you’re shopping around for loans, multiple inquiries can appear on your credit report. The credit scoring system is supposed to prevent this from negatively affecting your credit score with a “buffer,” but it doesn’t always happen.
Credit Card Companies
Any application to a credit card company will involve having your credit pulled. This includes credit cards associated with particular stores and special offers. Obviously credit card companies are interested in your credit record and need to know if you’re likely to pay debts responsibly. Again, interest rates will be based on risk levels. Although credit companies and lenders will usually ask for your permission before pulling your credit, they are not always legally required to.
According to the FCRA, insurance companies may look at your credit information when you apply for insurance and they do not need permission from you. Any time you get a new policy or renew coverage, they can pull your credit report.
Potential employers can pull credit reports whenever you apply for a job, but they’re required to notify you first. They’ll check your credit for evidence of irresponsibility, and may even use it to profile you in terms of how responsibly they think you will perform your job. Unfortunately, if you refuse, they might not hire you.
Debt collectors will pull your credit to find addresses and try to check up on you. They might try to evaluate your assets to see if they can sue you. The legality of this is different in different states and should always be questioned. Don’t assume that a collection agency automatically has this right.
Sometimes your credit score can affect your ability to rent a condo, house, or apartment. Landlords have a right to view your credit as a measure of your ability to pay your rent. You don’t necessarily have to be asked for permission, but often they will let you know. They’ll be looking at your financial responsibility, as well as your public records of evictions.
Any utility company or service that has continual billing can make an inquiry on your credit. Some of these will be hard inquiries, some not, and they might be worth trying to get removed. This can include inquiries from internet, TV, and cell phone providers; inquiries from property management companies; and inquiries from gas, water, and electric utilities. Again, many of these might be just soft inquiries, but they’re worth investigating.
Pulling Your Own Credit Report
You have the right to pull your own credit for free at least once a year, sometimes more in certain states, and sometimes more if a certain action is taking place. You can also sign up for a service that allows you to pull it every day. Pulling your own credit won’t affect your credit score.