Your credit history contains highly sensitive information, and the last people you probably want perusing that personal data are debt collectors. While companies must generally have your permission before requesting copies of your credit records, under certain circumstances collection agencies can access your credit history from all three credit bureaus without your consent.
According to the Fair Credit Reporting Act, which regulates the laws governing consumer credit reports, any business can access your credit history without your permission provided the business has a valid “permissible purpose.” The FCRA notes that one such permissible purpose is to review your credit information in connection with the collection of a debt. Thus, if you owe money to a debt collector, the debt collector has the legal right to pull and review your credit report.
Debt collectors have a variety of reasons for wanting access to your credit reports. One reason a debt collector might conduct a credit inquiry is if the company cannot locate you. Your credit report contains your current and past addresses – making it easier for the company to track down your current whereabouts and contact you about your debt.
Credit Score Impact
When a company conducts a credit inquiry, that inquiry falls into one of two categories: a hard pull or a soft pull. Soft pulls are generally inquiries that are not directly connected to a financial transaction. For example, you conduct a soft pull when you pull your own credit report to review it for accuracy. Hard pulls, however, are directly connected to financial transactions and can cost your credit score several points each time they occur. Because collection agency inquiries are hard pulls, repeated inquiries from a debt collector can hurt your credit rating.
For a debt collector to have the legal right to pull your credit report without your consent, you must owe the company a legitimate debt. If the debt collector is pursuing you in error, the Fair Credit Reporting Act gives you the right to dispute the inquiry in an effort to have it removed from your credit report. The good news about credit inquiries is that, unlike most other forms of negative information which linger on your credit report for seven years (and sometimes longer), the credit bureaus only keep inquiries on file for a maximum of two years before deleting them from your record