Mega Contributor
RobertEG
Posts: 18,212
Registered: ‎03-19-2007
Re: Is this advice correct?
[ Edited ]

The article is incorrect as a general principle.

A primary purpose for recording credit inquiries in a consumer credit file is that creditors consider recent apps for new or increased credit as a potential indicator of consumer risk.   FICO has reached the same conclusion based on their data showing a correlation between recent attempts to acquire new or increased credit and potential for increased risk of later repayment.

 

As such, in my opinion, any consumer-initiated request for new or increased credit should be shown in the consumer's credit report, or else the system is not doing as intended.

 

However, the reporting of inquiries is, except for inquiries solely to make promotional offers for credit, unregulated by the FCRA.  How inquires are stored and recorded is based entirely upon an administrative coding system developed by the CRAs.  That system is shrouded in mystery.  I have never seen an objective explantion of how it operates. 

 

What appears clear, at least to me, is that the basic distinction between a so-called "hard" and "soft" inquiries is whether or not the inquiry is included in consumer reports pulled by parties other than the consumer.  How that comes about depends upon how the CRAs code each inquiry, thus determining whether it is generally available for credit report review and for credit scoring.  Therein lies the mystery. 

 

There are clearly well-established types of inquiries that have specific codes that prevent view by others, and thus inclusion in credit scoring.  Notable examples are consumer pulls of their own report and creditor pulls for internal account reviews that are not associated with requests for new or increased credit on the part of the consumer.  Clearly "soft."

 

Then it gets real murky.  Take any consumer-initiated request for new or increased credit.  Normally intended to be coded such as to appear in the consumer's credit report and be included in scoring.  How in the world do such inquiries get coded in a manner that prevents that?  Do the CRAs have reporting codes that state "consumer-initiated request for new credit, but dont include in their credit report"?  That would appear, at least to me, to be a totally subjective matter, and contrary to the intent of recording such inquiries.  If the CRAs dont provide such subjective codes, then how do such inquiries that clearly qualify for CR inclusion get recorded in a manner that prevents that?  Does a creditor who promises to report only as a soft pull have to provide a fake coding to make that come about?  That is, do they provide a stated permissible purpose other than the real purpose?  Who produces the intended coding?  Do creditors have codes to report under, or do the CRAs generate the necessary code based on the stated permissible purpose provided by the inquiree?

 

I have never seen an authoritative answer to how that system works.  It would be helpful if someone has a source for explaining the coding process.