A credit check is an investigation by a lender to determine if a person meets their credit standards. The report includes payment history, employment history, and debt information. Lenders use this information to decide whether to approve a loan or credit card, and may adjust the terms accordingly. Consumers can obtain a free copy of their credit report once a year, or purchase it at any time.
An action taken by a prospective lender to determine if a person meets their extended credit standards is called a credit check. This involves seeking a detailed analysis from a credit reporting agency or agency. The report typically contains information such as date of birth, Social Security number, current and in some cases previous address, employment history, current employer and income, and payment history of loans and other debts.
When a credit check is performed, the payment history is documented through the items reported by creditors to the credit bureaus. Includes information on timely payments, or lack thereof. If the investigation shows that a person is at low risk of paying off the debt, the loan or credit card may be turned down. In cases where credit is approved despite a less-than-glossy report, the loan amount or credit limit may be lowered, the interest rate may be increased, or both.
Every time a person applies for a loan or credit card, or tries to get store financing for a purchase, the lender will check the person’s credit. In reality, most will request at least two reports from different sources and compare them. Three of the major credit bureaus are Equifax, Trans Union, and Experian, which was originally called TRW. These are well-established and frequently used sources of credit information.
In the United States, the Fair Credit Reporting Act of 2003 provides that anyone can obtain a free copy of their credit report once a year from any recognized credit reporting bureau. There are certain exceptions that will allow people to get this information more than once a year, such as if they are denied credit, insurance, or employment, or if their rates or interest rates have increased in the last 60 days. Consumers can write to the credit bureau, include proof of the situation and request a report.
Consumers can also purchase a report by submitting a written request to a credit bureau by mail or by ordering online. It’s a good idea for people to keep track of what’s on their credit report to help maintain good credit, not only so they can borrow money when they need it, but also to make sure they get the best rates.
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