The question about credit check is almost endless. It ranges from;
- What is a credit check for a job?
- What is a credit check for renting?
- Also, what does a credit check show?
- What is a soft credit check1?
- What does a soft credit check show?
- Some ask what a good credit score is
- What is a credit check Canada?
A credit check means a review of your credit history. This is done by prospective lenders, to determine if they can lend to you.
A credit card issuer will always check your credit history by looking at one (or maybe more) of the credit reports kept by the three major credit bureaus (i.e.) Experian, TransUnion, and Equifax.
This reports display all your credit accounts and act as the best indicator of how you handle your credit as well as how much credit you’ve already been extended. Your reports also show whether or not you’ve been sued or arrested or have filed for bankruptcy before.
Why Would A Company Check Your Credit?
Lenders will check your credit history if you are applying for a personal loan, auto loan, credit card, or mortgage. This is to help them determine if you have a history of default payments or if you make your payments on time. This is also to determine whether you are capable of borrowing more money as well as help them gauge the interest rate they will charge you. This application triggered credit check is known as a hard inquiry.
The three credit bureaus also need to carry out a check on your credit history, to get regular updates (usually once a month) from the companies that have already loaned to you. Their reports are also used by Fair Isaac Corp., to calculate your FICO credit score, which is a necessary indicator of your creditworthiness.
Do Credit Checks Affect Your Credit Score?
It is true to the extent that hard inquiries can ding your credit score. This is because, if you apply for multiple new credit lines in a short period of time, you may come off as a higher risk and your score may be slightly affected temporarily. This, however, depends on the type of loan generating hard inquiries.
Thus, if it is a type that typically involves rate-shopping, a student loan, auto loan, or mortgage, your FICO score ignores if you’ve had a spurt of applications in the 30 days before scoring. It will just be assumed that you are looking for the best rate.
Can Someone Check Your Credit Without Your Permission?
Someone else cannot check your credit if it’s a hard inquiry. But if you are trying to apply for a loan or job, buy a new car, or rent an apartment, the company you want to do business with, is to get your permission before checking your credit.
If it is a soft inquiry, there can be a credit check without your permission. But the good news is, soft inquiries do not ding your credit scores and in most cases can be seen by you.
In circumstances like legal matters, government benefits, child support, investments, and insurance, your credit reports can be accessed without your permission.
Ensure you always do a regular check on your credit reports to spot errors that may affect your ability to get a loan or spot potentially fraudulent activities.