As you know, your credit rating is a very important factor in your overall financial well-being. It determines everything from your ability to obtain the best credit card interest rates to whether or not an employer will hire you. At some point in your life, at least one person will run a credit check on you and it will most likely be a potential employer or lender.
So what, exactly, is involved in a credit check? Knowing can make all the difference.
The Process of a Credit Check
Credit Check for Employment:
In the case of an employment background check, the three major credit reporting agencies (Experian, TransUnion and Equifax) provide a modified version of your credit report. This modified version is known as an “employment report” and the information is meant to assist a potential employer draw conclusions about you.
There are a few things that an employment credit check does not do. The person running the check will not be informed of your credit score or date of birth. It also does not place an inquiry on your credit file, which could otherwise negatively impact your credit rating.
Before an employer can run a credit check on you, they must request your authorization in writing. If you choose to allow this, you must also provide written consent.
Credit Check for a Loan:
When applying for loans, the credit check application and information are a bit different. The potential lender is provided a “tri-merge report,” which is a combination or average of your credit scores from all three agencies. This number, along with additional information discussed in the following section, helps a lender to determine your creditworthiness in a matter of minutes.
Information Released in a Credit Check
You may be surprised by how much of your detailed personal information is released to the party running the check. Below is the information that is included:
1. Identifying Information: Your personal information that is used to determine who you are is detailed in a credit check. This includes your name, address, previous addresses and social security number. Other important information, such as how long you’ve lived at your current address and employment record, is also included.
2. Outstanding Debt: Every bit of money you owe, from the mortgage to student loans to credit card balances, is listed.
3. Payment History: Your credit check will not only inform the investigator of your debts, but also how you have handled them in the past. All of the payments you have made in the past, including late ones, are detailed.
How You Can Pass a Credit Check
It is important to keep your credit in good standing at all times. If you have not yet established a credit history or your credit rating is low, find out how a credit score is calculated and take the necessary steps to improve it as soon as possible. An excellent credit score will ensure you pass any check.