Seriously, who really cares about your credit?
The article title might be a bit facetious, but it does not diminish the importance of the answer. Your credit rating can affect many aspects of your life, often in unexpected ways. Keeping track of who is looking at your credit and why can help minimize the negative consequences attached to poor credit or, worse, identity theft.
That said, I am no proponent of being credit obsessed. Fixating on the minutia of your credit, which I have seen evidence of many times over my years as a financial educator, can actually lead you to building credit for credit’s sake. You become unable to see the forest for the trees, making unhealthy long-term financial choices in exchange for short-term credit-building options. Consumers that I term 850ers are consumed by achieving the top credit score possible (850), even though it achieves them no more advantage than any other consumer in the top 40% who have scores as low as 750 or so. It is overkill, and it can lead them to take out loans they do not need, carrying credit card balances that are unnecessary, and paying interest that is preventable.
Though I disagree with fixation and obsession, I do think you should still care about your credit rating. And I do believe there are ways to build your credit mindfully and responsibly. Knowing what is on your credit report is always the first step to a better credit rating since your credit scores are based solely on information found on your credit reports.
Consequently, you should also care enough to see who else is – or could be – looking at your credit reports. Knowing this will help you understand when and why credit is important.
Before I provide the following list of organizations who can access your credit, you should rest assured that gaining access to other people’s credit is regulated by the Fair Credit Reporting Act (FCRA). Anyone who accesses your credit report without your permission and without a permissible purpose is in violation of this law. That could include your family members, your Ex, your Ex’s attorney, your neighbor who works at a mortgage company, and even your friendly neighborhood Spiderman. If they access your credit report without your explicit permission, you have rights under the FCRA to seek compensation for provable damages.
Who Can View Your Credit Report?
So, who cares about your credit report and might access it for permissible reasons? Regardless of the reason, they still need your permission. Here are 15 types of organizations and people that you might find listed under the hard inquiries section of your credit report:
Obviously, whenever you apply for a loan from a traditional lender (mortgage, car, personal, etc.), the paperwork you fill out, even if it is electronic and online, gives the lender permission to both receive and report your credit information to the credit bureaus (officially known as consumer reporting agencies or CRAs). Such information helps them determine if your risk level as a borrower fits their lending parameters.
When lenders look at your credit report subsequent to your loan request, they will be listed on your credit report as a regular inquiry (sometimes categorized as a hard or active inquiry, depending upon the credit bureau). Such inquiries have a minor impact on your credit rating for up to a year, though they stay visible for two years. If you do not recognize a regular inquiry (e.g. a loan or credit card application) on your credit report, go to the credit bureau’s home page and use the error dispute tool to get it removed.
2. Property managers and landlords/landladies:
This one makes sense, too. Your credit rating indicates how likely you are to pay your debts as agreed. If you are good at making your debt payment on time and as agreed, it follows that you are likely to pay your rent on time and agreed as well.
3. Utility companies and cell phone plan providers:
Similarly to property managers, utility companies check your credit to get an idea of the type of risk you are for paying your bills on time. The better your credit, the less likely the utility company is to require a security deposit. The good news for those with bad credit? Utility companies cannot deny you service based upon bad credit. The bad news? Expect to drop a wad of cash as a deposit to open the account. Cell phone companies, on the other hand, can deny you a monthly plan and special phone deals if your credit profile does not match their requirements.
4. Potential employers:
Here is where things seem to get a bit wonky. What does your credit have to do with how qualified you are to work for the potential employer? In all likelihood, nothing. However, well over half of employers are including credit in their background checks of potential new hires. In certain industries such as finance, brokerages and even law enforcement, this might make sense. But cashiers? Dockworkers? Customer service representatives? In such cases, employers might use credit checks as a way to differentiate between two or three equally qualified candidates. If I were an HR professional, I might ask myself the question, “Which of these equally qualified candidates will be more focused and productive on the job? One with no personal finance issues or one with multiple bill collectors who are likely to call during work hours?” Aha, that makes a little more sense. Most people still don’t like it, but they get it.
5. Vehicle insurance providers:
Okay, now this just seems downright ridiculous, doesn’t it? There cannot possibly be any justification for charging someone with poor credit a higher monthly insurance premium, right? It is true that having bad credit does not mean you are a bad driver. However, neither does being under 24 years old, being a male, being single, and living in a rural location. Yet these are all “pools” that, if you belong to them, will bump up your premium. As groups, these pools are more likely to be in accidents and file insurance claims, so they get charged higher premiums. Like it or not, low credit ratings make up another pool. It is not fair to the individual, but insurance is not about being fair. It is all about forecasting and minimizing potential risks.
6. Life insurance providers:
If you apply for a personal life insurance policy (not for a group policy like you would through an employer), expect the company to ask for your permission to check your credit. Can your credit history really predict how long you are likely to live? No, thank heavens. However, life insurance companies may want to use your credit rating as a predictor of how likely you are to afford a certain policy or to make the monthly payments on time.
7. Homeowners insurance providers:
A credit-based insurance score is not permitted in all states, but it is used by most insurance companies to predict your likelihood of submitting claims on your insurance policy. The more claims you submit, the more money the company loses. Charging higher premiums is one way to offset these potential losses. If this feels unfair to those who can afford it least, it is critical to understand that income is never a factor in our credit rating. There are plenty of high-income earners with terrible credit ratings and plenty of low-income earners with great credit scores. It is not about how much you earn. It is all about borrowing only what you can afford and paying it back as agreed.
8. PLUS student loans:
While student loans made by the US Department of Education directly to the student have no credit component to their qualifications, PLUS loans made to their parents do. PLUS loans are also available to graduate and professional students. PLUS loan borrowers will need to have good credit or else require a co-signer (“endorser”) who does.
9. Private student loans:
Not all private student loan lenders check credit, though most do. This makes sense since these are loans for actual money. Whether or not it is wise to take on private student loans is a topic for another day.
10. Investment brokerages:
If you apply for a margin account with an investment brokerage, you should expect them to check your credit. This seems reasonable since they are enabling you to purchase stock on margin (borrowed money). They will want to know what your history is with regard to paying back other borrowed money.
11. Collection agencies:
If you have an account that has gone to collections, you may wonder how it will impact your credit. In most cases, collection accounts will end up on your credit history. Additionally, some credit agencies will check the rest of your credit history to learn more about you. Are you paranoid to think that an agency trying to collect on an old account might check your credit report to see if there are updates to your employment or new payments on other accounts before they decide to pursue collection activities? I don’t think so. Plus, they may be looking for additional information that might include other contact numbers and addresses.
12. Government and public assistance agencies:
Some government agencies involved with providing public assistance benefits or child support enforcement are permitted to check your credit. Additionally, courts and law enforcement agencies may also access your credit when judgments against you are involved.
13. Current creditors and lenders:
If you already have a credit card or two, chances are you will likely see your current and past card companies listed under the inquiries section of your credit report. If any of your past creditors have ever gone to court and successfully obtained a judgment against you, they will likely be listed as well. But why would your current credit card company check your credit? “They don’t want to give me another card, do they?” Well, actually, they might. If your current credit card company sees improvements in your credit rating, they might consider offering you another card with a different (higher or lower) interest rate or credit limit. If they see that you are making your payments on time but that you are at or near your credit limit on a competitor’s card, they might consider offering you an increased credit limit on your current card in the hopes that you will transfer the balance from their competitor.
14. Anyone else with your permission:
As noted above, no one is permitted to look at your credit report without your permission. Even potential lenders have a section in their application that requires your signature (ink or online). So who else might want to look at your credit for legitimate business reasons? If you want to send your child to an expensive private elementary or secondary school, be prepared to provide such permission. If you are considering going through an elective medical procedure, such as a cosmetic surgery, a live-organ donation, varicose vein ligation, vasectomy, etc. it means that your insurance will not pay for the expense. Instead, you can expect the provider to ask your permission to see your credit history so they can decide whether to offer you financing for the treatment.
15. Last, but not least… You:
Not only have you had the right as a US citizen since 2004 to look at your own credit report for free from each of the three consumer reporting agencies through com, but you should feel compelled to do so each year. The Fair and Accurate Credit Transaction Act (FACT Act) was driven by the idea that if you can see your credit report regularly, you are more likely to minimize the effect on your credit of any inaccuracies or even identify theft. Each time you pull your credit, the date will show up on the soft inquiries section of your report. If you see your name in the section alongside a date that you do not recognize, that would be a sign, albeit rare, that someone else has checked your credit fraudulently using your name and your social security number.
Who Can’t View Your Credit Report?
Anyone else viewing (or attempting to view) your credit is probably doing so against the law. Plain and simple. You can dispute such listings on your credit report through the credit bureaus’ home page “error dispute” options. You can also contact directly the organization that pulled your report. The problem is more often human error than malicious intent. However, if it is an egregious violation, fill out an identity theft complaint through the Federal Trade Commission’s special IdentityTheft.gov site and consider contacting your local police. With the affidavit or police case number, you can then contact the credit bureaus and place a freeze on your credit at no cost.
Your credit is used in so many business decisions that you might easily dismiss unauthorized access to your credit as unimportant. The truth is that you need to look at your credit regularly and follow up on any hard inquiries that you do not recognize. Like living by a budget, paying your debts as agreed, and carry insurance on your car, regularly reviewing and protecting your credit report needs to be part of your everyday money management habits. After all, no one cares as much about your credit as you do.
Do You Have Questions About Who Can View Your Credit Report?
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