Can a Collection Agency Run Your Credit Without Permission?
Discover when collection agencies can legally access your credit report without permission and how to protect your financial standing.
Collection agencies recover overdue funds for creditors or lenders, often after initial collection attempts fail. Consumers frequently wonder whether these agencies can access their credit reports without explicit permission.
When Collection Agencies Can Check Your Credit
Collection agencies can check your credit report without direct permission if they have a “permissible purpose” as defined by the Fair Credit Reporting Act (FCRA). The FCRA regulates how consumer credit information is collected, accessed, and used.
A primary permissible purpose for collection agencies is debt collection. The agency has a legal right to review your credit report to aid collection efforts, such as confirming contact information or assessing your ability to pay. This allows them to access your credit information without needing consent each time.
Different Types of Credit Inquiries
When a collection agency checks your credit, it results in one of two types of inquiries: a soft inquiry or a hard inquiry. Understanding their distinction is important due to their different impacts on your credit score.
A soft inquiry occurs when a company checks your credit for a background review, not for a new credit application. These inquiries do not negatively affect your credit score. Collection agencies often perform soft inquiries for account management or to assess debt recovery likelihood. Soft inquiries may or may not appear on your credit report, depending on the credit bureau, and are only visible to you.
A hard inquiry occurs when you apply for new credit, such as a loan or credit card. These inquiries can temporarily lower your credit score by a few points, though the impact is usually minimal and temporary. Hard inquiries remain on your credit report for up to two years, but generally only affect your credit score for about 12 months. While collection agencies primarily use soft inquiries, a hard inquiry could occur if they are involved in legal actions related to debt, though this is less common for routine collection activities.
Protecting Your Credit Report
Monitor and protect your credit reports from inaccuracies or unauthorized activity related to collection agencies. You have the right to obtain a free copy of your credit report from each of the three major nationwide consumer reporting companies: Equifax, Experian, and TransUnion. AnnualCreditReport.com is the official website where you can access your reports weekly. Regularly reviewing these reports allows you to identify any unfamiliar inquiries or accounts.
If you discover an inquiry or account that you do not recognize or believe is inaccurate, you have the right to dispute it. You can initiate a dispute directly with the credit bureau that is reporting the information, or with the company that furnished the information. When disputing with a credit bureau, you should provide a clear explanation of the error and include any supporting documentation.
Upon receiving a dispute, the credit reporting agency is generally required to investigate the item within 30 days. If the information is found to be inaccurate or cannot be verified, the credit bureau must correct or remove it from your report. If the inquiry was unauthorized or fraudulent, you should also contact the company that made the inquiry and report any identity theft to the Federal Trade Commission (FTC).