Why do banks pull credit reports?
Along with many other pieces of information, potential lenders and creditors – including credit card companies, mortgage lenders and auto lenders – may use your credit scores and credit history to help make lending decisions. These companies want to know how likely you are to pay the money they lend back as agreed.
Can I Trust the Score From My Bank? Any credit score provided on your bank's app or by your request will be a dependable gauge of your creditworthiness, as long as the information on your credit report is accurate.
Card issuers pull your credit report when you apply for a new credit card because they want to see how much of a risk you pose before lending you a line of credit. This credit check is called a hard inquiry, or “hard pull,” and temporarily lowers your credit score a few points.
FICO ® Scores are the most widely used credit scores—90% of top lenders use FICO ® Scores. Every year, lenders access billions of FICO ® Scores to help them understand people's credit risk and make better–informed lending decisions.
A few highlights: Personal information, including any names associated with your credit, current and past addresses and date of birth. Current and past employers that have been listed on past credit applications. Open loans and revolving credit accounts with credit limits, dates of late payments and current status.
This is because individual consumer reporting agencies, credit scoring companies, lenders and creditors may use slightly different formulas to calculate your credit scores. They might also weigh your information differently depending on the type of credit account for which you've applied.
Although Experian is the largest credit bureau in the U.S., TransUnion and Equifax are widely considered to be just as accurate and important. When it comes to credit scores, however, there is a clear winner: FICO® Score is used in 90% of lending decisions.
If your Credit Karma score isn't accurate, the problem is probably elsewhere. That is, one of the bureaus made an error or omitted information. Or, the information might have been reported to one bureau but not others.
Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.
Good news: Credit scores aren't impacted by checking your own credit reports or credit scores. In fact, regularly checking your credit reports and credit scores is an important way to ensure your personal and account information is correct, and may help detect signs of potential identity theft.
Can a bank pull a credit report without permission?
Now, the good news is that lenders can't just access your credit report without your consent. The Fair Credit Reporting Act states that only businesses with a legitimate reason to check your credit report can do so, and generally, you have to consent in writing to having your credit report pulled.
A single credit inquiry from a lender will have little impact on your credit score. Credit scoring models also take into account when a consumer is shopping for the best rate on a student loan, auto loan, or mortgage and do not penalize them for this comparison shopping.
Under the Fair Credit Reporting Act, a bank can obtain a consumer report if it has a "permissible purpose," which may include the following: Credit transactions. Review or collection of an account. Opening a deposit or savings account.