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Credit ENIGMA: Before ELECTRONIC Credit reporting??

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Valued Contributor

Credit ENIGMA: Before ELECTRONIC Credit reporting??

Interesting conversation just had with a friend. Since everyone seemingly on this board is so afraid of lenders doing AA on their cards (CLD, closures) - and these are mostly always a result of a soft pull of ones credit - I wonder how companies did SP back in he day prior to electronic CR pulls, like when the only option was to see a physical copy of the report via snail mail??

I wonder what year all the constant SP began on our credit. Honestly I almost never heard of AA happening until after 2008/09.. when it was rampant. Now it's not sporadic to be sure - but I wonder when the SP trend began for lenders or when it was not even a viable option to perform.

Credit enigma #89,009! Woooooooo
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7 REPLIES 7
Regular Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??

One factor may be the CARD Act. It banned certain practices such as one institution raising your interest rate when you had negative activity with another institution (universal default). Without the ability to use this sort of "risk based pricing" they shifted to other risk management strategies such as account closures or CLD.

 

 

I know nothing about the history of the soft pull, but automation and computerization has been common in the banking industry since at least 1970's.

Message 2 of 8
Community Leader
Legendary Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??

I'm a bit confused as to how electronic vs paper delivery of a requested credit report is related to it being a hard vs soft inquiry.

A soft inquiry simply means that it is coded by the CRA such that a record of the inquiry is not provided to parties other than the named consumer.

It affects who can see the inquiry in subsequent credit reports.

How is that affected by whether a copy is provided in paper or electronically?

Message 3 of 8
Established Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??


@Joeyzoom416 wrote:
Interesting conversation just had with a friend. Since everyone seemingly on this board is so afraid of lenders doing AA on their cards (CLD, closures) - and these are mostly always a result of a soft pull of ones credit - I wonder how companies did SP back in he day prior to electronic CR pulls, like when the only option was to see a physical copy of the report via snail mail??

I wonder what year all the constant SP began on our credit. Honestly I almost never heard of AA happening until after 2008/09.. when it was rampant. Now it's not sporadic to be sure - but I wonder when the SP trend began for lenders or when it was not even a viable option to perform.

Credit enigma #89,009! Woooooooo

I'm going to go out on a limb here and take a stab at it - I'd guess that they would send a letter to whatever CRA they wanted the report from and the CRA would mail the hard copy back to them. Soft pulls and hard pulls were still the same back then, the results just took longer. I was getting pre approvals in the mail in the 80's and 90's. 

 

I also had my credit line decreased on one card in the early 90's. I would guess that the constant SPs are a result of modern technology - and your definition of constant. The Internet has been around since the early 60's and the WWW since the early 90's so financial institutions have had the ability to perform electronic queries for a long time. CRA's began creating computer databases in the 70's.

 

Consumer credit reports have come a long way from the subjective, mostly derrogatory files of the 50's kept by business co-ops in specific geographic locations to where we are today. As we borrowers become more and more credit savvy, the CRA's have to constantly change their models to provide a more accurate score - i.e. changing how multiple inquires for an auto loan are scored. So, as we become more credit savvy and our scores become more accurate, lenders want to keep up with our behavior via soft pulls. Lenders are taking advantage of the same technology that we are.

 

Over $200,000 in credit across 12 cards.

FICO ranges from 791 -824 as of 07/26/2019
Message 4 of 8
Established Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??


@RobertEG wrote:

I'm a bit confused as to how electronic vs paper delivery of a requested credit report is related to it being a hard vs soft inquiry.

A soft inquiry simply means that it is coded by the CRA such that a record of the inquiry is not provided to parties other than the named consumer.

It affects who can see the inquiry in subsequent credit reports.

How is that affected by whether a copy is provided in paper or electronically?


Hard Pull = Consumer initiated request - in other words you gave the lender permission to pull your report

 

Soft PUll = Lender initiated request.

 

In other words, it isn't just some arbitrary coding by the CRAs.

Over $200,000 in credit across 12 cards.

FICO ranges from 791 -824 as of 07/26/2019
Message 5 of 8
Community Leader
Legendary Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??

There is, in fact, an arbitrary coding system with the CRAs that permits consumer-initiated requests for credit (which clearly can be coded as "hard") to nonetheless be coded as "soft".  Consumers are routinely able to obtain soft pull coding of inquiries that relate to consumer initiated requests for credit.

 

Exactly how, and under what conditions, the CRAs will code as soft when an inquiry clearly qualifies for coding as hard is not, to my knowledge, posted in any publication available from the CRA.  For example, does the CRA have a code available to creditors which essentially states "consumer-initiated request for credit, but conceal from showing in credit reports"?  Or must a creditor falsely state that an inquiry is not a consumer-initiated request for credit in order to code it as soft?

 

Coding of credit inquiries is not addressed in the joint CRA credit reporting manual ("The Credit Reporting Resource Guide, (C) CDIA), as inquires are not the reporting of information to the CRAs, but rather the opposite.... a request to see what others have reported.   

The coding of inquiries is thus not publicly addressed in that manual.  I know of no CRA publication that formally addresses the coding of inquiries.

The limit of soft coding appears to be identification of certain types of inquires that are routinely coded as soft, such as consumer pulls of their own reports, and regular annual reviews conducted by existing creditors. 

 

Whether soft or hard, the inquiree obtains the same, full credit report, irrespective of the manner in which it is transmitted.

Message 6 of 8
Established Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??


@RobertEG wrote:

There is, in fact, an arbitrary coding system with the CRAs that permits consumer-initiated requests for credit (which clearly can be coded as "hard") to nonetheless be coded as "soft".  Consumers are routinely able to obtain soft pull coding of inquiries that relate to consumer initiated requests for credit.

 

Exactly how, and under what conditions, the CRAs will code as soft when an inquiry clearly qualifies for coding as hard is not, to my knowledge, posted in any publication available from the CRA.  For example, does the CRA have a code available to creditors which essentially states "consumer-initiated request for credit, but conceal from showing in credit reports"?  Or must a creditor falsely state that an inquiry is not a consumer-initiated request for credit in order to code it as soft?

 

Coding of credit inquiries is not addressed in the joint CRA credit reporting manual ("The Credit Reporting Resource Guide, (C) CDIA), as inquires are not the reporting of information to the CRAs, but rather the opposite.... a request to see what others have reported.   

The coding of inquiries is thus not publicly addressed in that manual.  I know of no CRA publication that formally addresses the coding of inquiries.

The limit of soft coding appears to be identification of certain types of inquires that are routinely coded as soft, such as consumer pulls of their own reports, and regular annual reviews conducted by existing creditors. 

 

Whether soft or hard, the inquiree obtains the same, full credit report, irrespective of the manner in which it is transmitted.


Except it is anything but arbitrary. The coding does follow a set of specific rules rather than being based on capriciousness or whim. It may appear to us to be arbitrary however.

 

The "consumer inititated requests for credit" can still be coded as soft and goes something like this:  "We will consider this our request for credit up to X amount. Anything over that will require a hard pull." Happens all the time. Has happened to me two or three times this year already.

Over $200,000 in credit across 12 cards.

FICO ranges from 791 -824 as of 07/26/2019
Message 7 of 8
Valued Contributor

Re: Credit ENIGMA: Before ELECTRONIC Credit reporting??


@Joeyzoom416 wrote:
Interesting conversation just had with a friend. Since everyone seemingly on this board is so afraid of lenders doing AA on their cards (CLD, closures) - and these are mostly always a result of a soft pull of ones credit - I wonder how companies did SP back in he day prior to electronic CR pulls, like when the only option was to see a physical copy of the report via snail mail??

I wonder what year all the constant SP began on our credit. Honestly I almost never heard of AA happening until after 2008/09.. when it was rampant. Now it's not sporadic to be sure - but I wonder when the SP trend began for lenders or when it was not even a viable option to perform.

Credit enigma #89,009! Woooooooo

Not so.  There are many folks here and elsewhere, who do not frequent these types of message boards, that are certainly not afraid of AA from a lender. But that's another topic of conversation. 

 

It likely has always been a viable option, for the lenders.  As long as there has been computerization of credit information, lenders have likely been monitoring consumer files.  AMEX and Diners Club cards dates back to the 50s, Visa and MasterCard (originally MasterCharge) came along in the mid-60s.  Big mainframe computers were in use at those times, and data on consumer spending habits have been tracked since those early days.  

 

When I got my first cards in the early to mid-70s, I'm reasonably sure that my spending was tracked at that time (the internal soft pull), even though the application process was a paper application and waiting weeks for a response.  Those apps were likely the hard pull, for a specific lender to see what was in other lender's files.  

 

Keep in mind that the credit reporting agencies date back to the late 1800s, in some form or another.  It was when IBM made great strides in computing power and capability in the 60s and 70s, that mass data collection became more common, and with that, the sharing of data.  

 

Soft pull or hard pull is irrelevant.  Adverse Action has been around since at least the 70s (I know this first hand! Smiley Surprised).  Whether due to one type of pull or the other didn't matter.  They did it.  What does matter in this discussion, is when the CONSUMER aspect of all this became more common.  Consumer awareness came about because of laws that were enacted in the 80s and 90s for their protection, and consumers became more aware of what was going on behind the scenes at the major credit reporting agencies.  SP, HP, AA...they have all been going on for a long time.  But I don't think one can equate an increase in SP resulting in more AA.  CRAs have become more sophisticated over the years (and decades) in how they monitor consumer credit.  

 

The hypothesis that an increase in SP results in an increase in AA is false.  That is not the sole basis for an AA.  It is the action of the consumer that generated the SP that also factors in.  Very few of us can know the inner workings of the CRAs, and there can be rampant speculation as to cause and effect.  However, anecdotally, we know that when consumers manage their credit wisely and don't draw attention to themselves, there is less of a probability of an AA than when one does something that deviates from the norm.  Going back to one of your original statements, that everyone seemingly on this board is so afraid of lenders doing AA on their cards, is more probably due to folks who frequent sites such as this are more likely to take risks that John Q. Public, who never comes here (or elsewhere) would ever take.  It's the very nature of the message board beast that folks become emboldened to do things that, had they NOT had been here and read something, they would be less inclined to do.  The Herd Mentality effect. 

 

If you want a specific year (or years) that caused more scrutiny to consumer financial transactions,  my best guess would be probably the mid-2000s, specifically 2006-2007 just prior to the financial collapse.  My guess is lenders saw it coming before the rest of us did, but were in denial...until the financial collapse actually happened.  

Message 8 of 8
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