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Dear Dr. Don,
In May, I opened a new CD at Wells Fargo and deposited less than $60,000. The bank also automatically opened a checking
account for me.
I requested no loans from this bank, yet I noticed on my credit report that they did a hard inquiry on my
credit history. Is this normal procedure? I've never had any other bank do this before. Does it have something to with the
Patriot Act?
-- Frances Fulminate
Dear Frances,
Some financial institutions make a practice of doing a hard inquiry on a depositor's credit report when opening a new deposit
account. It doesn't make sense from the depositor's perspective because they're not requesting a loan, they're making a deposit.
A hard inquiry is typically a loan application and a soft inquiry is simply the monitoring of the consumer's
credit report. A hard inquiry impacts your credit score, where a soft inquiry does not.
I've had other readers ask whether the Patriot Act is the reason for lenders taking this approach. I've been
told informally that this is the stuff of urban legend -- the Patriot Act doesn't require this bank action. The Patriot Act
does, however, require banks to know their customers as discussed in the Bankrate feature,
"Patriot Act compliance."
In an earlier column, "Savings
history hardly impacts credit," I asked Craig Watts, public affairs manager at Fair Isaac Corp., to weigh in on the issue.
Here's what he wrote:
"Bottom line, credit inquiries are usually a very minor contributor to a person's FICO score and
simply aren't worth getting worked up about. In most cases, a hard inquiry costs the person's score less than 5 points. People
can help themselves by focusing their energy on the basics in score management: pay bills on time, keep card balances low and
take on new credit only when it's needed."
A hard inquiry stays on your credit report for two years but only influences your credit score for one year.
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