What Is an Account Inquiry?

An Account Inquiry Explained in Less Than 4 Minutes

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An account inquiry is a review of a financial account, whether it’s a credit or deposit account. The inquiry can be related to previous transactions or payments on the account.

Learn more about how account inquiries work so you’ll be better prepared.

Definition and Example of an Account Inquiry

An account inquiry is a review of a credit or deposit account. The inquiry is often related to previous transactions or payments, and it can be completed by both individuals and institutions.

  • Alternate name: Credit check

For instance, if you’re preparing to buy a home, you may want to check your credit report. You’ll request a copy of your report and review it to ensure all the information it contains is accurate.

Once you’re ready to apply for a mortgage, your lender will make an account inquiry on your credit report. This inquiry helps the lender determine whether you’re a good candidate for a mortgage.

How an Account Inquiry Works

An account inquiry usually happens when someone is looking to take on new debt, like a loan, mortgage, or credit card. Your lender wants to see whether you have a history of paying your bills on time, so it will run an inquiry on your credit report.

When your lender checks your report, it will see whether you pay your bills on time and if you’ve ever defaulted on a loan. Your lender will also see how many open accounts you have and whether you seem over-extended on your credit.

The information helps the lender determine whether to approve you for the loan. It also determines the types of interest rates and terms you’ll receive. For instance, a borrower with a poor credit history will pay higher rates than someone with a positive credit history.

However, lenders are not the only institutions that will run a credit check. If you try to rent an apartment, your landlord may check your credit history. If you have bad credit, that landlord can charge you higher rent or deny your application altogether.

Your payment history accounts for 35% of your FICO score. So if your credit score is lower than you’d like, one of the simplest ways to raise it is by paying your bills on time.

Types of Account Inquiries

If you’ve ever applied for a loan or credit card, your lender likely ran an account inquiry, or a credit check, on your credit report first. Your lender can run two types of credit checks: hard or soft inquiries.

Hard Inquiries

You must give your lender permission to run a hard inquiry on your credit report. A lender will typically make a hard inquiry before approving you for a credit card, loan, or mortgage.

The information the lender finds on your credit report will also determine the types of rates and terms you receive. Hard inquiries are listed on your credit report and can cause your score to drop slightly.

Too many hard inquiries within a short period of time can be a red flag to potential lenders. However, hard inquiries are removed from your credit report within two years.

Unlike soft inquiries, hard inquiries will negatively impact your credit score. While there is no set number of points your score will drop per inquiry, you should expect your score to drop a few points after the inquiry takes place.

Soft Inquiries

Lenders will run a soft inquiry on your account if they are trying to pre-approve you for a loan. A soft inquiry will also be generated if you check your credit report. Soft inquiries won’t show up on your credit report and won’t negatively affect your score.

You can see a list of the hard and soft inquiries made on your account by ordering a free copy of your credit report.

Key Takeaways

  • An account inquiry is a review of a credit or deposit account.
  • Lenders will often run account inquiries to determine whether you qualify for a credit card, loan, or mortgage.
  • If your lender makes a credit inquiry on your account, it will either be a hard or soft inquiry.
  • You should limit the number of hard inquiries run on your credit report since it can cause your credit score to drop slightly.