Can a Collection Agency Do a Hard Pull of My Credit Report?

Question:

Can a collections agency request a copy of my credit file?  I have recently received a consumer disclosure of my credit file and I notice that a collections agency has requested and received a copy of my file. I have not requested any credit from this collections agency and have not given them any permission to do a credit check. 

On my consumer credit disclosure it says this collections agency has performed a "hard pull'. It's visible to my bank and any company I have applied to for a mortgage, and they are now asking me about this. How does this 'hard pull' affect my credit rating? Is it possible to have it removed? If not, how long does it remain on my credit file?

Answer:

Collections agencies can access your credit file – as long as it's in connection with the collection of a debt that you owe. Your credit file can also be accessed by your landlord, if you're entering into or renewing a tenancy agreement; your employer, if it's required for employment purposes; your insurance provider, if it's connected to the underwriting of your insurance; or any other situation that is prescribed by law or where a direct business need for the information exists.

According to TransUnion, as long as a company can prove that the credit check is for one of the above reasons, they don't need your permission to access your file. In the case of the collections agency, once the agency is responsible for collecting a debt, it is considered a 'creditor' and is able to pull your file without your permission.

If the viewing is credit-related, it will appear as a 'hard pull'. A 'hard pull' – or a 'hard inquiry'  – is recorded for the benefit of creditors and lenders and is therefore viewed by others. It helps companies who are thinking about lending you money determine if you're a prime candidate, by allowing them to see how often you've applied for new credit, as well as if you've had any problems with that credit.

Soft inquiries, on the other hand, are recorded for your benefit. They allow you to keep track of the organizations that have accessed your information for other non-credit related purposes – such as the type of check performed by a landlord.

Both hard and soft inquiries stay on your report for six years from the original placement, but only hard inquiries affect your score – and in varying ways. For example, a few hard inquiries by credit card companies will actually improve your score, because they're helping you build a credit history. Too many, however, will negatively affect it because they'll give a creditor the impression that you're having financial troubles.

The good news in your situation is if you contact the collections agency and settle your debt, the 'hard pull' on your credit report will eventually draw less attention from prospective mortgage lenders and credit providers. The longer a debt is paid off, the better your score will become.