Your credit report is primarily intended to demonstrate your creditworthiness to lenders and creditors. Your credit report allows companies to decide whether you are eligible for a loan or credit card based on your credit report.
However, lenders and credit card companies aren’t the only ones who can pull your credit report. Your credit report is available to many third parties, some of whom can pull your credit without your knowledge. However, they must first have a “permissible purpose.”
Permissible Purpose
The Fair Credit Reporting Act (FCRA) only permits users with a legal “permissible purpose” to pull your credit report. These include:
- When you apply for credit, or when an existing creditor is reviewing or initiating collections.
• When a court or federal subpoena orders it.
• When the consumer has instructed the party in writing to access their credit report.
• When a potential employer requires a credit check as part of the hiring process.
• When you apply for insurance.
• When there is a legitimate business need as part of a business transaction.
Although there are several other acceptable reasons for pulling your credit report, the main takeaway is that there must be a legitimate government or business need for doing so. Some examples of credit checks include: applying for a credit card or loan, applying for insurance, or being the subject of a criminal or civil investigation.
In the absence of a permissible purpose, a third party cannot access your credit report. Your ex-husband, neighbor, friends, and relatives can’t pull your credit report. In most cases, even if the party has a permissible purpose, you still need to provide written consent.
Who Can Check Your Credit Report?
There are more companies and third parties that can pull your credit report than you think:
- Creditors and Lenders: creditors or lenders pull your credit report when you apply for credit (such as a credit card, auto loan, or mortgage).
- Landlords: credit checks may be required by landlords when you apply for a rental. During the application process, your credit report will be pulled to check for red flags and ensure that you can reasonably afford the rent.
- Employers: employers can check your credit before extending you a job offer in some states.
- Collection agencies: if you have an account in collections, the collection agency may periodically pull your credit report.
• Utility companies: utility companies may check your credit report when you become a new customer.
• Government agencies: some government agencies can pull your credit report if you apply for government assistance or if you are under investigation. - Credit monitoring and credit repair services: your credit report may be pulled on a regular basis if you hire a service to monitor or repair your credit. Some credit repair services will ask you to grant them limited power of attorney so that they can pull your credit and act on your behalf.
Soft Inquiries and Hard Inquiries
Credit inquiries are not all the same: there are hard inquiries and soft inquiries.
Hard inquiries occur when a potential lender pulls your credit report to make a decision about your application. For example, when you apply for a credit card or a loan. It is possible for hard inquiries to appear on your credit report and lower your credit score temporarily, but the damage is limited in the long run. It’s a good idea not to launch too many hard inquiries at once. Hard inquiries are usually conducted with your permission.
Soft inquiries usually happen when your credit report is pulled as part of a background check. You will be preapproved for a loan or a potential employer will check your credit. Inquiries may or may not occur with your permission, but they do not affect your credit score.
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