I just noticed that I have inquiries from a couple of collectors. Are they allowed to check my credit?
Collectors are allowed to check your credit. The Fair Credit Reporting Act lists all of the “permissible purposes” for which the credit bureaus are allowed to furnish credit reports. Among these purposes is the collection of a debt. See Section 604 of the FCRA below.
Credit Repair Issues
The points that are relevant to your credit repair project include the question of the impact on your score, and the related issue of whether the collector that made the inquiry actually owns the debt.
Potential Score Impact
Theoretically, an inquiry by a collector should not have an impact on your score. The only credit inquiries that should reduce your score and impact your credit repair are the voluntary, or “hard”, inquiries that result from an application for new credit by you. Collector inquiries should fall into the category of “soft” inquiries, like those unsolicited inquiries made by creditors screening you for “pre-approved” offers. In actual practice, the categorization of inquiries into “soft” and “hard” require coding on the part of the inquiring party. This does not always happen properly and hence the need for credit repair arises.
A Credit Repair Concern
A related issue is the one of debt ownership. This is especially relative to credit repair and worth investigating for any debt prior to responding to a demand from a collector. Collectors regularly buy and sell debt. Their portfolio of accounts is their primary asset and when accounts do not pay out within in an acceptable amount of time, often as little as six months, they sell the debt. In a surprising number of cases the selling collector accidently fails to remove the account from their books and continues to collect. This is a credit repair issue which can be resolved with debt validation.
Sec. 604. Permissible purposes of consumer reports [15 U.S.C. §1681b]
(a) In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
(1) In response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.
(2) In accordance with the written instructions of the consumer to whom it relates.
(3) To a person which it has reason to believe
(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer.