Why do you pull credit for new account application?

Under the requirements of the Patriot Act, all financial institutions must do an identity check on a new customer. They use "customer identification programs" (CIP) that compare your name, address, date of birth, and other facts to the information contained on your credit report. Your credit score would not be damaged by that step.

The CIP regulations require institutions to implement reasonable procedures for:

  • Verifying the identity of any person seeking to open an account, to the extent reasonable and practical.
  • Maintaining records of the information used to verify the person's identity, including name, address, and other identifying information.

Financial institutions also review ChexSystems/TeleCheck and sometimes credit report data during the process of determining if a customer qualifies to open a new account. Under FCRA regulations, the financial institutions are required to have a permissible purpose such as "intend[ing] to use the information in connection with a credit transaction involving the consumer" in order to pull a credit report and must obtain the consumer's consent first. A hard inquiry like this could cause a small credit score ding.