What is Permissible Purpose?

Permissible purpose is the legal standard that determines who can access your credit report and under what circumstances. It comes from the Fair Credit Reporting Act (FCRA), and it exists to prevent random people, businesses, or entities from pulling your financial data without a legitimate reason. Not everyone who wants to see your credit history is entitled to — and understanding who can and can't access your report matters, especially when you're dealing with debt.

I bring this up because clients in our debt relief program sometimes worry about who's looking at their credit reports during the settlement process. They're concerned that creditors, collectors, or even potential employers might be pulling their credit and seeing the delinquencies. Understanding permissible purpose helps clarify what's actually happening — and what's not.

Who Has Permissible Purpose to Pull Your Credit

The FCRA defines specific situations where accessing your credit report is legally permitted.

Creditors evaluating a credit application. When you apply for a credit card, mortgage, auto loan, personal loan, or any other form of credit, the lender has clear permissible purpose to pull your report. This is the most common type of credit inquiry and results in a "hard pull" that appears on your report.

Existing creditors managing your account. Your current credit card company can pull your report periodically to review your account — even if you didn't apply for anything new. They use this to decide whether to increase or decrease your credit limit, change your interest rate, or close your account. This is how credit card companies sometimes proactively lower your limit when they see your overall debt increasing — they pulled your report, saw the risk, and adjusted.

Debt collectors with a legitimate claim. A collection agency or debt buyer attempting to collect a debt you owe has permissible purpose to access your report. They use this information to assess your financial situation and determine their collection strategy. This means that during a debt settlement program, your creditors can and do see what's on your report.

Employers (with your written consent). Employers can pull a modified version of your credit report — it doesn't include your credit score — for employment purposes, but only if you give written permission first. They cannot access your credit without your explicit consent, and they must tell you if they plan to take adverse action based on what they find. Some states have restricted this practice further, limiting employment credit checks to specific industries or positions.

Landlords evaluating a rental application. When you apply to rent an apartment or house, the landlord or property management company has permissible purpose to pull your credit as part of the application screening. High debt levels and delinquencies can affect your ability to rent, which is one of the practical consequences people don't always consider when thinking about their debt situation.

Insurance companies. Many auto and home insurance companies use credit-based insurance scores to set premiums. The theory — backed by actuarial data — is that credit behavior correlates with insurance risk. Some states have restricted or banned this practice, but in most states, insurers can access your credit data.

Government agencies for certain purposes. This includes child support enforcement, determining eligibility for government-issued licenses, and certain tax-related inquiries.

You. You always have the right to access your own credit report. Checking your own report is a soft inquiry and never affects your score. You're entitled to free reports from each credit bureau annually through AnnualCreditReport.com.

Who Does NOT Have Permissible Purpose

This is equally important.

Your neighbor, ex-spouse, or family member cannot pull your credit report out of curiosity. Accessing someone's credit report without permissible purpose is a federal crime under the FCRA.

A business you have no relationship with cannot pull your report without your initiation. If a company you've never contacted pulls your credit, that's potentially an FCRA violation.

An employer without your written consent cannot access your credit. If you discover an employer pulled your credit without permission, that's actionable under the FCRA.

Debt collectors for debts you don't owe. If a collector is pulling your credit report for a debt that isn't yours, that inquiry lacks permissible purpose.

Hard Pulls vs. Soft Pulls

Not all credit access is created equal, and this distinction confuses a lot of people.

Hard inquiries happen when you apply for new credit. The lender pulls your report as part of their decision-making process, and the inquiry appears on your report for 2 years. Each hard inquiry can temporarily lower your credit score by a few points. Multiple hard inquiries in a short period — indicating you're shopping for credit aggressively — can cause a more noticeable dip.

The exception: rate shopping for a mortgage, auto loan, or student loan is treated differently. Multiple inquiries for the same type of loan within a 14 to 45 day window (depending on the scoring model) are typically counted as a single inquiry. The scoring models recognize that you're comparison shopping, not opening multiple accounts.

Soft inquiries happen when someone checks your credit for a non-lending purpose, or when you check your own report. Pre-approval credit card offers, employer background checks, account reviews by existing creditors, and your own credit monitoring are all soft pulls. They appear on the version of your report that you see but are invisible to lenders and don't affect your score.

Permissible Purpose and Debt Settlement

Clients in our program sometimes ask whether their creditors are watching their credit report during the settlement process. The answer is: they can, and some do.

Your existing creditors have permissible purpose to pull your report at any time while you have an active account with them. During a settlement program, when accounts are delinquent, the creditor can see that you're not paying other accounts either — which actually provides context for the negotiation. A creditor who sees that your entire credit picture is distressed is often more willing to settle because they understand this isn't a case of someone selectively not paying one bill while living comfortably on the rest.

Debt buyers who purchase your accounts also gain permissible purpose. When they pull your report and see multiple delinquencies and high utilization, it often makes them more realistic about what they can collect — which can work in your favor during settlement negotiations.

What your creditors cannot see is whether you've hired a debt relief company. That information isn't on your credit report. They can see the delinquencies and the pattern, but they don't know what strategy you're pursuing.

Unauthorized Credit Pulls: What to Do

If you believe someone accessed your credit report without permissible purpose, you have legal recourse.

Review your credit reports. Look at the inquiries section for any pulls you don't recognize. Each inquiry lists the company name and date.

Contact the company. Ask them to provide documentation of the permissible purpose for their inquiry. If they can't, demand they have the inquiry removed from your report.

Dispute with the credit bureau. File a formal dispute with whichever bureau shows the unauthorized inquiry. The bureau must investigate and remove the inquiry if it lacks permissible purpose.

File an FCRA complaint. The CFPB (Consumer Financial Protection Bureau) handles FCRA complaints at consumerfinance.gov. You can also file with the FTC.

Consider legal action. The FCRA allows you to sue for damages from unauthorized credit pulls. Statutory damages range from $100 to $1,000 per violation, and willful violations can result in actual damages plus attorney fees.

Frequently Asked Questions

Can a debt collector pull my credit without my permission? Yes — if they have a legitimate claim to collect a debt you owe, they have permissible purpose under the FCRA. They don't need your consent. However, if the debt isn't yours or is being pursued by an entity with no legal right to collect it, the inquiry may lack permissible purpose.

Do pre-approved credit card offers mean someone pulled my credit? Yes, but it's a soft pull. Credit card companies use prescreened lists from the credit bureaus to identify consumers who meet certain criteria. This doesn't affect your score. You can opt out of prescreened offers by calling 1-888-5-OPT-OUT or visiting OptOutPrescreen.com.

Can my spouse check my credit report? Not without your consent. Even in community property states, your credit report is individual. Your spouse would need your authorization — or they'd need to be a joint account holder on a specific account — to have permissible purpose.

How many hard inquiries are too many? There's no hard cutoff, but more than 5 to 6 hard inquiries in a 12-month period can start to significantly impact your score and signal credit-seeking behavior to lenders. One or two inquiries are generally insignificant.

Can I freeze my credit to prevent all access? A credit freeze prevents new hard inquiries — no one can open a new account in your name. However, it doesn't prevent existing creditors from accessing your report for account management, and it doesn't prevent debt collectors from pulling your report. You can temporarily lift the freeze when you need to apply for credit.

Does a debt relief company pull my credit when I enroll? Practices vary, but at The Debt Relief Company, we review your credit situation during the consultation based on information you provide. We don't perform hard credit pulls as part of enrollment — there's no credit requirement for our program, so a pull isn't necessary.