We’ve all heard of being nickel-and-dimed to death, but what about getting credit-checked to death? A Credit.com reader wrote to us, worried this might be happening. After more than a year with the same checking account, now her bank notified her that it will begin to regularly pull her credit report.
Our reader found this to be strange, and potentially threatening. The bank says it wants to check her credit to offer her “overdraft protection (which I don’t have on my checking account), and for fraud (which I don’t have).”
Why the concern? Some types of credit checks ding a consumer’s credit score by a fraction of a point. With regular credit pulls, however, such little hits could add up. Which has our reader considering some pretty drastic action.
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“Is there any way to block access to my credit report to the bank?” She asks. “I do not see why they need this access and I need to know how to stop it without having to change banks. Or worse, have no bank at all.”
In one word, here’s the advice from Credit.com’s experts: Breathe. This is not likely the dangerous situation it may at first seem to be. It all comes down to the difference between a “hard pull” and a “soft pull.” Banks and lenders usually perform hard credit pulls only when they’re considering whether to give a consumer more credit — a loan, say, or a new credit card. A hard pull gives them access to a consumer’s entire credit file. And it causes a small decrease in the consumer’s credit score.
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This probably isn’t what LaBlue’s bank actually plans to do, says Barry Paperno, Credit.com’s credit scoring expert. Most likely, the bank wants instead to do a “soft pull.” In this case, the bank gets access to a more limited set of data from a consumer’s credit report. That plus the fact that soft pulls happen in batches, with many bank customers getting periodically checked (either every month or financial quarter) means that banks pay less for a soft pull than they do for hard ones, which they must request and pay for individually, Paperno says.
If the soft pull shows that a consumer has a great credit score, the bank might use that information to market more products to her, like loans or a business credit card. If the pull shows that a consumer is falling behind on some payments, the bank might become concerned that she could overdraw her checking account, and offer her overdraft protection.
As for whether she can block her bank from checking her credit reports, Paperno says, “For banks to check your credit regularly, that’s not unusual. Most of us, when we agree to open an account with a bank, we give them the right to check our credit occasionally.”
Most importantly, a soft pull has no impact on one’s credit score. So there’s no reason to freak out, or close the account, or give up banks altogether and start stuffing money into the floorboards. The only thing you might want to do is to call the bank and make sure that these regular credit checks are in fact soft pulls.
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Image: Betsssssy, via Flickr
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Have a question for our experts? Email them at CreditExperts@Credit.com.
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I want to unsubscribe. After reading between the lines I find out it is not free.
Good article! Many Americans have no idea there are two types of credit inquiries, soft and hard.
-fused, credit.com Forum moderator