Soft inquiry won’t harm credit score

By Don Taylor, Ph.D., CFA, CFP • Bankrate.com

Q:   Dear Dr. Don,
My employer wants my permission to check my consumer report to check motor vehicle records. I trust that that is the reason, but I wonder if doing the check can “ding” my credit record also.
– Jay Just-Wondering

A:  Dear Jay,
There are two types of inquiries on a credit report. The first, known as a “soft inquiry” is from existing account relationships, firms prospecting you to extend an offer to apply for credit and employers.

These soft inquiries are visible to you only when you pull your credit report. When others pull your report, these soft inquiries aren’t shown on the credit report they review. Ordering your own credit report also generates a soft inquiry.

Hard inquiries occur when you apply for credit. Some banks also do a hard inquiry when you open a deposit account. A hard inquiry stays on your credit report for two years but affects your credit score only in the first year. A single, new, hard inquiry will have a minimal impact on your credit score.

Motor vehicle records aren’t part of your credit report. It’s likely your employer asked your permission to pull your credit report and your motor vehicle history. The Drivers Privacy Protection Act as amended requires your employer to get your written permission to access your motor vehicle history.

The Bankrate feature, “Your credit history and your job,” explains in greater detail the credit report your employer receives as well as and how and why they receive it.

Read more Dr. Don columns for additional personal finance advice.