What is a Credit Check?

This article explains what a credit check is. As credit is such an important part of our lives today, it is vital to have a clear understanding about how a credit check can affect you.

Who Would Want to Check Credit?

Have you ever been to a retailer, say an electronics store or computer store, and you’ve had to use their in-house finance to make your purchase? Before you were approved for that finance deal, you’ll have been subject to a credit check by that retailer’s finance company.

If you had have failed that credit check, not only would you have not been able to buy your chosen item, it may have hindered you in the future when it comes to further purchases where finance is required. So what is a credit check, and why should you place such importance upon it?

Credit Checks Explained

Much like the name suggests, a credit check is where your credit background is checked by relevant companies, to determine whether or not you would be a risk to offer a loan. Thousands of companies carry out credit checks every day, on both consumers and businesses. Some organizations will now check credit on potential employees, especially in this day and age of both identity theft and corporate identity theft.

How Would Someone Check a Credit Score?

If a credit check needs to be carried out on you for whatever reason, there are three main US companies that the check will be carried out with. Called credit bureaus, these three companies are Experian, Equifax and TransUnion. Although they offer a similar service to one another, they are unique to each other, and may offer slightly different information.

To determine whether you are eligible for a loan or finance agreement, a credit check will award you a credit score. This is a points system that is accumulated from numerous information sources about you – how you’ve paid bills in the past, if you’re up-to-date on your rent, if your credit cards or store cards are all paid up, etc. Even the amount of time you’ve been in the same job, or lived at the same address, can affect your score.

For instance, if you’ve lived at the same address for 10 years or so, you’ll get a far higher check credit score than if you’ve lived at 10 addresses in one year. The same goes if you’ve been in your present job for a few years, as it shows a level of maturity and commitment. For credit check purposes, the higher you’re rating, the easier to be approved.

Why Your Credit Check is so Important to You?

As well as being able to purchase expensive goods that you’d otherwise be unable to afford, a good credit score is important in so many other ways as well. That’s why it’s important for your credit check to come back clean, or with as little dubious information as possible.

For example, if you wish to buy a house in the near future and your credit check showed up as a bad risk, you wouldn’t be able to make that purchase until your credit had improved. Or, you could receive credit from one of the hundreds of finance companies that specialize in people with bad credit, but this is best avoided if possible. This is because usually they will tie you into an extremely high interest agreement.

One other area you need to be careful in is if you have too many credit checks done on you, as this can also adversely affect your credit rating. So, if you are turned down for credit somewhere, don’t keep trying in other places – instead, write to the credit bureau involved and find out why your credit check came back the way it did.

Site Links Related to the Capital One Credit Card

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