Understanding credit inquiries and guarding against identity theft
By Allstate
Last updated: January 1
If you've recently applied for a new credit card, mortgage or car loan, chances are your credit report reflects this activity. That's because each time your credit history is accessed, a credit inquiry is noted on your report, according to Experian.
Keeping track of inquiries on your credit report can help guard against identity theft, as an inquiry from an unknown business could indicate someone else is using your name for fraudulent activity. So, how do you know which types of inquiries to look for on your credit report?
The two types of credit inquiries
There are two types of credit inquiries, according to the Consumer Financial Protection Bureau (CFPB):
Hard inquiries: When you apply for credit, inquiries by the lenders appear on your credit report. The CFPB says these credit checks, known as hard inquiries, affect your credit score since they are an indication of how often and how recently you applied for credit. Experian notes that new hard inquiries may be factored into a creditor's decision, as they often mean you have recently added debt.
Soft inquiries: When your credit report is reviewed by you, by lenders reviewing existing accounts, or by prospective lenders for pre-screening, it is noted as a soft inquiry. These will not affect your credit score, according to the CFPB.
Credit inquiries and identity theft
The Fair Credit Reporting Act (FCRA) allows consumers to get a free copy of their credit reports every 12 months, according to the Federal Trade Commission (FTC). To monitor inquiries and guard against identity theft, the FTC recommends requesting and reviewing your credit reports from the three major credit bureaus (Equifax, Experian and TransUnion) each year. You can request your credit report at annualcreditreport.com.
Experian points out that seeing hard inquiries you don't recognize doesn't always mean identity theft. When you are rate shopping for things like a car loan or mortgage, lenders often send your information to more than one company to try to find the best terms. These companies, and often their abbreviated name or parent company, will appear on your report, says Experian. If you're unsure of why your report was accessed, call the company directly.
When you see an inquiry on your credit report from a business you don't recognize or you aren't in the process of applying for a major loan, it could be a sign of credit fraud, Experian says. Finding inquiries for services you haven't applied for may mean someone is applying for credit under your identity.
If you suspect you're a victim of identity theft, the FTC recommends taking immediate action and following these steps:
- Put a fraud alert on your credit report by calling one of the three major credit bureaus. This lasts 90 days, is free to do and the bureau you call will alert the other two. When a fraud alert is attached to your report, lenders and businesses have to take extra steps to verify your identity before offering credit.
- Contact businesses related to suspicious inquiries or affected accounts. The FTC advises that you ask for receipts and keep records of all communication with these companies.
- Submit an identity theft affidavit to the FTC. Use the affidavit report to file a police report — and keep a copy. These two reports together make up an identity theft report, which can help you remedy the situation with the credit reporting companies, debt collectors and businesses that may have given credit to the thief.
Remembering these tips and monitoring your credit report may help you better protect yourself from fraud. If you have additional questions, Experian and Equifax have resources that can offer further assistance.