Credit Inquiry

You want a line of credit to purchase a full box-set of every episode of Sex and the City. Because Black Friday is approaching, it’s only $4.99 for the DVDs on Amazon. You think it’d be a good conversation starter on your bookcase (Hint: It won't be.)

Before you buy it, you apply to Amazon for $3,000 in credit so you can buy things and then pay Amazon interest for the right to a closed end loop card. They send an inquiry to credit agencies to check your debt history and your ability to pay off bills on time.

Amazon is filing what is called a credit inquiry. This inquiry will provide one of two types of inquiries. A hard inquiry is specifically used to determine if they should underwrite a loan to you. If Amazon approves, you can now buy all the useless junk you want, up to $3,000 at a time. This inquiry will remain on your credit report for at least 18 months.

The soft inquiry, however, is done as a way to market products. For example, you might go online and look for an auto loan on a website like LendingTree. At that point, a variety of companies will run soft inquiries and then market the lines of credit and APR they can offer.