We know that lenders check our credit to determine our eligibility for loans and our interest rates on loan products. Sometimes landlords and employers do, too, as they review our applications for apartments and jobs. But did you know that your utility or cable company might check your credit when you sign up for service? I’ve recently been schooled on the matter.
Here’s how it happened: My fiancé and I are in the midst of refinancing our mortgage and the underwriter came to us last week asking why Verizon had checked our credit a couple months back. Apparently it had popped up as an inquiry on both of our credit reports and the underwriter wanted to make sure we weren’t applying for another loan or line of credit (which may have worked against us).
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A credit inquiry from Verizon, we thought? How did this even happen? The only thing we could think of was that we signed up for Verizon’s cable service in June when we moved to a new apartment. But why would that have led to a credit inquiry? Verizon isn’t a bank or a landlord or an employer. What business do they have checking our credit? I was furious, especially if this had somehow hurt our credit score.
For whatever reason, our underwriter asked us to “supply a letter explaining the inquiry.” Banks and underwriters often ask borrowing applicants for a deluge of items when refinancing or applying for a mortgage. They’ve become quite nitpicky these days (for good reason). I know this is a good thing in the grand scheme of things, but why was Verizon checking our credit in the first place? And why was our underwriter concerned? Verizon, last I checked, is not a financial services firm so this couldn’t have been related to a loan.
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We asked our mortgage broker to help us out. She asked all three credit reporting agencies—Experian, Equifax and TransUnion—to look into the inquiry (as it appeared on all three of our reports). The “credit supplement,” as it’s called, came back in 24 hours and stated that the inquiry was (surprise!) for “utility purposes” when we signed up for new cable service in June. As it turns out, the company routinely does credit checks of prospective customers, but this is not something we spotted in Verizon’s fine print (even though I guess it was clearly written). I asked our resident credit expert Tom Quinn if this is typical. He said it is. Cable is “a form of credit when you think about it. You are getting service before you pay,” he said, and as a result, companies want to make sure you’ve got a good track record of paying your bills. But don’t worry, he said, “generally speaking, the inquiry will have no impact on your [credit] score.” It’s not like multiple inquiries from credit card companies, which can have a negative impact on your credit score.
So I got pretty worked up for nothing (and now feel a little bit sheepish) but, hey, I learned an interesting factoid about the credit world in the process—and hope you did, too.
[Related article: Tips to Improve and Rebuild Your Credit]
Image: Jeremy Noble, via Flickr.com