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Could anyone explain me what is credit check?

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Could anyone explain me what is credit check?  Reply with quote  

Could anyone explain me what is credit check?
Post Fri Jun 22, 2012 8:44 am
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I would also like to add that when a credit check is conducted, payment history is documented through items reported by creditors to credit bureaus, such as timely payments - or lack thereof. If a credit check shows a person to be a poor risk for repaying debt, the loan or charge card may be refused. If credit is approved despite a less than glowing credit check, the amount of the loan or the credit limit may be lowered; the interest rate may be increased, or both.

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Post Fri Jun 22, 2012 10:09 am
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Re: Could anyone explain me what is credit check?  Reply with quote  

Originally posted by perfectionj
Could anyone explain me what is credit check?

Typically, a lending institution (or creditor) will contact one or more credit reporting agencies before extending you (the debtor) any credit, and the reason they'll contact them is because it's the credit reporting agencies that maintain a credit file on those that been granted credit in the past.

The creditor will request a credit report that is a direct reflection of the information in the credit file housed by the credit reporting agencies. The act of making that request and 'doing a credit check' is one and the same. They look at your credit report so they can see what's in your credit file, and they do that to get an idea of how risky it will be to grant you credit.

One of the things they look at is your payment history. Do you pay on time per the agreement you signed, or are you habitually late and frequently fail to make your payments as agreed? Have you been opening up an account only when needed, or do you fill out every application you come across? Do you owe just a little bit of money, or are you in debt up to your eyeballs? There is a lot of information in your credit file that give potential lenders an idea of whether or not giving you money is worth their risk.

In fact, there can be a lot of information--some deemed good and some deemed not so good, and it can be a challenge for creditors to fairly and thus appropriately distinguish between others whose credit is neither all bad nor all good, so when a creditor checks your credit, not only will they receive your credit report that shows all that information, they'll also get something called a credit score (usually a FICO based credit score) to help them simplify the process of determining whether or not you're a good credit risk. The higher the score, the better.
Post Sat Jun 23, 2012 12:17 am
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Credit checks are background checks which are performed to determine someone's credit worthiness. Most credit checks are run through credit bureaus, organizations which compile data about individuals and their credit history, although a credit check may also include calls to financial institutions and other entities for financial references. Credit checks have become par for the course for many people in the developed world when they want to get involved in financial transactions.

Post Mon Jul 23, 2012 3:51 am
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While applying for credit, the responsible lenders want to make sure you can comfortably afford to manage any new borrowing. Before giving the credit they calculate a credit score which helps them to assess the chances that you will be able to repay what you owe. People with a high score are usually seen as lower risk, and are therefore more likely to be granted credit.
Post Tue Jul 24, 2012 5:50 am
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A credit check is when they check your credit to see how much money a lender would like to lend you, lending practices are based on credit as well as largely based on income
Post Fri Aug 03, 2012 4:34 am
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