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How to dispute unauthorized credit report inquiries

By Minda Zetlin

You already know that if you see a negative item on your credit report that isn't true, you should dispute it. But did you know the same goes for credit report inquiries you don't recognize or didn't approve?

Though disputing unauthorized inquiries is less common than disputing incorrect information, it's likely to be worth the effort. For one thing, inquiries may have a negative effect on your credit score and could cost you a loan approval or lower interest rate, particularly if there are several of them. More important, an unrecognized inquiry could be an early sign that you're about to become a victim of identity theft.

What should you do if you see an inquiry on your credit report, but don't remember authorizing it? The process is a little bit different than that for disputing negative credit account information.

How to dispute unauthorized credit report inquiries

1. Make sure you weren't being prescreened
Just because you don't recognize an inquiry doesn't mean it's not legit. Check your credit report carefully to make sure the inquiry wasn't done for promotional purposes, in advance of offering you a prescreened credit card or other loan, for example. Lenders planning to extend such offers are allowed to view your credit report without your permission, but their inquiries should be clearly marked as promotional on your credit report.

These inquiries aren't a red flag for fraud, and they're considered "soft " inquiries. A "hard" inquiry typically occurs when you do something to request credit (such as applying for a credit card or loan). Such inquiries appear on your credit report when it is sent to creditors, and will lower your credit score slightly, typically by five points or less, for up to 12 months. Soft inquiries, on the other hand, have no effect on your credit score. Besides pre-screening, other soft inquiries include those from employers or insurance companies, as well as those from current creditors who are simply reviewing your account. (If you like, you can choose to opt out of pre-screening, either for five years or permanently unless you opt back in. To learn more, visit optoutprescreen.com or call 888-567-8688. 

2. Check your calendar
You don't recognize the inquiry, and it wasn't marked as promotional. But have you gotten an insurance quote, a new account with a utility or rented a new place? Any of those could result in a legitimate credit inquiry.

"A common source of confusion is when someone applies for a retail store account," says Rod Griffin, director of public education at Experian. Although a store card is branded with the store's name, most retailers contract with banks or other lenders to actually issue the cards and service the account. "The name of the lender will be on the inquiry," Griffin says. "People don't recognize it because it doesn't have the name of the retail store." Similarly, if you've applied for a job that requires a credit check (and if so, the company has to request your permission to check your credit), a third-party company that provides employment screening may be the one that checks your credit.

If you've retained the paperwork from your store card or job application, it may name the organization that will actually be checking your credit report. Or you may be able to deduce who it was based on the date of the inquiry. But if after reviewing your activities you still don't recognize the inquiry, it's time to take action.

3. Ask for more information
You need to know more about whether and when you authorized the credit inquiry, or if it was legally initiated. The easiest first step is to call the company that did the inquiry and ask for more information. "If you first want to make sure you truly do not know who made the inquiry, then by all means start with a phone call," says Marc Bourne, vice president, Know It All Intelligence Group, which provides employer screening and investigations.

The advantage to doing this is that you may clear the question up quickly since most inquiries are legit. "You might not recognize the name, but it turns out to be the lending arm of a company you're doing business with or a new utility," says Liz Weston, a personal finance columnist and author of "Your Credit Score." "It doesn't hurt to dispute it, but my experience has been these kinds of inquiries tend to be someone with a permissible purpose."

The disadvantage of calling is that it may be a waste of time. "Certain creditors will not give you any information over the phone," Bourne says. "You could wind up sitting on hold for 35 minutes just to find out that you have to contact them by mail. That's why we suggest doing everything in writing." The added advantage is that this creates a record of your dispute whereas a phone call may not.

4. Ask for proof
"If they have your authorization or what they think is your authorization, they will send a copy of what you signed. Make sure it really is your signature and information," Bourne says. "Make sure it explicitly grants the company permission to pull a credit report. Especially for employment purposes, it may say 'public records' or 'criminal records,' but if it doesn't explicitly say 'credit report,' they don't have authorization."

Under the Fair Credit Reporting Act, a credit reporting agency must retain a record of companies who have accessed your credit report.

-- Meredith Griffanti
Equifax spokeswoman

What if the creditor says you gave permission over the phone or online? They should still be able to substantiate it, Bourne says. They should have details about when you gave permission and identifying information to show it was really you. "If it was by phone, they should provide a printout that says you gave verbal authorization on this date to this operator," Bourne says. "It should also say what the operator transcribed into their system."

If the proof is something you don't recognize, or the creditor says you gave authorization at a time when you know you didn't, take immediate action. Tell the bureau to put a freeze, or at least a fraud alert, on your account (that bureau should then notify the other two). Also, since each of the big three credit bureaus (Equifax, Experian and TransUnion) don't necessarily contain the exact same information, you should check for any further evidence of fraud that didn't show up on the report you viewed. You can pull a free copy of each credit report once a year from AnnualCreditReport.com.

5. Dispute the inquiry with the credit bureau
What if the creditor can't provide proof or just plain doesn't answer you? "Generally, they have 30 days to respond under the Fair Credit Reporting Act," Bourne says. If they don't make that deadline, it's time to dispute the inquiry with the credit bureau, he advises. "Let them know you sent a letter to the creditor requesting confirmation of the inquiry and they ignored you."

The credit bureau is then required to follow up with the creditor. "If the credit bureau doesn't get a response either, it has an obligation to remove the disputed inquiry," says Bourne. Legally, the credit bureau must respond to you within 30 days. Nevertheless, Bourne says, "Some credit bureaus don't work fast when it comes to inquiries. They aren't a top priority, and they are less apt to help you with an inquiry than with a disputed account or charge."

6. Determine if you need the inquiry removed
Whenever you encounter an unfamiliar inquiry, your first priority should be to make sure that it's not a sign of identity theft. If it is, act quickly to protect yourself. What if the inquiry did come from a company you do business with, but it didn't have the legal right to view your credit report? Should you try to have the inquiry removed?

First, make sure the inquiry is not a soft inquiry that won't be shown to prospective creditors. If that's the case, the report will say so. You may still choose to take issue with the company that requested the soft inquiry, but there's not much point in having it removed from the record since you're the only one who'll ever see it.

How you deal with hard inquiries depends on your situation. If you're not planning to shop for a loan in the near future, or have serious credit issues such as late payments or bankruptcy, then disputing a hard inquiry may not be worth the effort, since any resulting improvement to your score may not do you much good. If you do plan to shop for a loan soon and every point on your credit score counts toward getting the best loan rates,  then trying to get inquiries removed may be worthwhile, particularly if there are several of them.

But it may not be simple. "Inquiries are generally a matter of fact," says Meredith Griffanti, a spokeswoman for Equifax. "Under the Fair Credit Reporting Act, a credit reporting agency must retain a record of companies who have accessed your credit report." And while there could be some disagreement between you and a creditor as to whether a payment was late, it's usually pretty clear whether or not a company viewed your credit report.

But if your report was obtained illegally, either because of identity theft or because the company or person who viewed it didn't have the right to do so, then it shouldn't stay on your report. "We'll work with you to remove that inquiry," says Griffin from Experian.

See related: How to dispute credit report errors, Hard inquiries have limited credit score impact

Published: August 14, 2013



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