Credit Check

A credit check is a good way for a lender or organization to make a decision whether or not to extend credit to an applying customer. The lender does not need to worry about whether or not the customer will repay the credit because they have an accurate idea of their payment history and can then also decide how much credit to extend.

Three major credit bureaus collect and store this information on consumers and companies such as banks, insurance companies, mortgage brokers and other lenders pay an annual fee to access this information when someone fills out an application with their organization. The information that is returned in a credit check will look at several key items involving a person’s accounts, loans, credit limits, balances, and payment history. It will also obtain public records on bankruptcies, foreclosures, and other court judgments.

A credit check will also show a list of people or organizations which have requested a credit check recently. The more credit checks that have been performed, the less likely a borrower is willing to lend you the money.

One of the key factors involved in a credit check is someone’s credit score. The score is based on a range from 300-900 with 900 as the best possible score. Higher scores generally can easily get credit, whereas lower scores are considered a credit risk. If someone has a lower score it can take longer to get credit or a co-signer may be needed.

The credit check process is a fair process for both the lender and the consumer. It is fair for the consumer because it doesn’t include characteristics such as race or sex and it just based on credit worthiness. It is also fair for the lender because they are not tricked into given credit to someone who should not easily get it.