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Guide to Credit Checks

Credit Check

Find out more about Credit Checks

Any person in the U.S. who has a mortgage, credit card, car loan or student loan also has a corresponding file known as a ‘credit file’. This is compiled by those companies with which you have credit as well as legal systems and government agencies. The file is a record of your credit payment history and even though your finances may currently be sound, a credit file can retain information for up to seven years. Therefore, if in the past you have missed credit card payments or even made late payments then this information can prevent you from having a current good credit rating.

There are three main credit bureaus in the U.S. that keep the database of this credit information and they are used by credit grantors to decide, based on your credit history, whether or not to grant you credit. These may be companies or individuals and this process is permitted by law. However, ‘identity theft’ has been known to exist and this, or a simple mistake, can affect your credit file without your knowing. It is possible to track your credit file through a credit check service to see what your current credit score is like.

A credit check is likely to be carried out on you if you are wanting to take out a loan or a mortgage. However, some companies may access the credit file of any prospective employees or business partners to ascertain the amount of financial risk involved in their employment or business transaction.

Car and life insurance companies also use credit checks on their customers and even renters may carry out credit checks on prospective tenants. Court records such as bankruptcies, judgments and even divorces all show up on your credit report as negative listings. Any accounts that are handed over to a collection agency will show up on your credit check and are viewed very negatively. Even excessive enquiries into your actual credit report are recorded by the credit bureaus and will themselves have an effect on your credit check rating.

It is worth checking your credit report regularly to ensure that information has been updated and is correct. Since credit checks can be made frequently, any error will unnecessarily hamper your trying to get a loan or a credit card. It may even mean that you end up paying a higher interest rate on any car loans or mortgage you may have and insurance companies will be likely to put you in a higher risk category if your credit rating is bad. Other people who are entitled to run credit checks on you and access your credit report are hospitals, doctors and dentists, utility companies, banks and even department stores.