HP versus SP

[crunching_numbers]

I am totally confused. I understand that a SP does not count against you and a HP does.  What I do not understand is why some lenders pull hard pulls, or sometimes pull HP.  Why are there two kinds? Why do they want it to count only sometimes? Who decides?

[RobertEG]

Good question!

I have never seen a satisfactory answer to that question.

I have yet to see a complete list of credit inquiry codes that differentiates between those that are to be scored (so-called "hard pull") and those that are not be be scored (so-called "soft pull").  I have also not seen a credit reporting guideline that permits the same type of permissible purpose to be coded alternately at the discretion of the inquiree.

When a person requests your credit report, they must state a permissible purpose authorizing their access.

It would seem that the stated permissible purpose should be reflected by a corresponding inquiry code.

One of the primary reasons why credit inquiries are scored is to track a consumer's quest for new credit.  If the inquiry is related to a consumer-initiated request for new or increased credit, it would seem that a so-called "hard-pull" code would be proper.

That begs the question..... is there a code available to creditors that essentially says   "consumer-initiated application for new credit, but not to be scored by FICO"??

That would seem contradictory.

[crunching_numbers]

I guess there are so many variations when people either request CLI or graduations. It seems people are saying that these events are either HP or SP.  Also, when applying for a mortgage FICO will lump requests together. So, OK if it is to buy a HOUSE, then all the inquiries are OK, but if you are trying to buy something else, then we get to count them each separately. Or not count them if we don't feel like it.

[GregB]

The standard is that any request for new credit is an inquiry. This is being called a hard pull. There are circumstances where a report can be pulled without resulting in an Inq:

- You pull your own report.

- An existing creditor pulls your credit for account review.

- A potential employer pulls your credit for employment purpose.

- A lender pulls your credit when they are considering buying the portfolio that contains one of your existing accounts.

- General inquiry that is not for new credit.

- A company requests the credit bureau give them a list of potential new customers that meet a certain requirement. This is where pre-approved offers from new creditors come from.

There is NO normal way for a new creditor to let you apply for new credit and not result in an Inq. In order to do so they would have to code it as NOT being an app for new credit. An existing creditor CAN use the Account Review coding for a potential CLI but this is normally not done when the customer initiates the CLI request. It is supposed to be used by the existing creditor for the purpose of normal account review and possible change of account terms.

Multiple mortgage or auto loans in a short period count as one because it is assumed you are shopping for a single mortgage or auto loan.

[RobertEG]

So, is the answer that, in order for a new creditor to record their inquiry for the purpose of a consumer app for new credit as a soft pull, they must provide an incorrect inquiry code?

Do creditors provide those codes directly, or are they generated internally by the CRAs based on the stated type of inquiry?

[GregB]

Robert,

I believe that is correct. If a lender is qualifying an applicant for new credit, correct coding of the credit check would result in a "hard pull".

If they already have a relationship with the customer, coding the inquiry for an increase in credit and coding it for account review, are more similar.

I think it varies according to the CRA and what process the lender uses to run the credit check. A credit check is normally "called" an inquiry but I'm avoiding that term so I don't confuse it with an inquiry that appears on somebody's report.

[bichonmom]

IME, it is up to the individual CCC/Bank/CU/etc. whether or not they code an inq for a CLI as hard or soft. My CU insists that it has to be a hard pull, claiming that it's the law. But of course, it is NOT the law. So, either they don't know that or are told this erroneous information to tell the consumers. In any case, it is their right to do a HP for a CLI... or a SP for a CLI.

I personally believe that they do a HP because they *want* it to show up on the customer's CR. Maybe they want other creditors to see the inq so they'll be able to figure out that the customer has requested a CLI. I don't know that for a fact -- it's just supposition.

At this point, I am choosing not to ask for any CLIs that are going to be HPs (well, with one exception -- NFCU -- but am hoping it will be soft). I think it's fair to do a HP for a new acct. But I feel like once I'm doing business with you and you *can* do a SP if you want, but you're insisting on doing a HP, I'm not going to give you the option for the HP. I'll just wait for an auto-CLI.

[RobertEG]

I would speculate that they do a HP, not to ding the consumer, but because it is proper.  If they have to report it for a reason other than the actual reason of review for new/increased credit, maybe they just dont want to play games with the system.