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How to Do a Credit Check

How to Do a Credit Check Photo

©Depositphotos/Feverpitch

Employers, banks, lenders and even landlords and landladies can run a background check on you; and possibly, a credit check.

Credit reports usually reflect how financially stable and responsible you are. It can be a make or break decision in certain situations like applying for a loan. There are legal procedures involved for doing so since credit reports contain very sensitive information of an individual.

Be eligible to do the check

Not all are allowed to do this since sensitive information is involved. You wouldn’t want just anyone to inspect your house would you? They should have legitimate reasons before letting them in like you called for pest control or a house inspector to assess your house.

It’s the same with credit checking. Your employer can do that if the position you’re applying for is finance related. Lenders do check your credit rating before approving a loan. Similarly, the owner of the apartment you will rent can get special permissions to check your credit report to see if you have the financial ability to pay monthly rent.

Get consent

Before anything else, you should be notified that you will be subject to a credit check. You can legally appeal if a credit check was done without any consent from you. Additionally, the federal government won’t allow anyone to just proceed with the check without proper consensus.

There should be a written consent – a letter of agreement with the person’s signature and usually, Social Security number – before proceeding with the check.

House owners sometimes ask applying tenants to pay the cost for processing a credit check on them.

Individual rights

The Fair Credit Reporting Act or FCRA gives protection to individuals against illicit credit check against them. If credit checking is done for fraudulent and unlawful purposes, the federal law provides an equal punishment for the act.

Forward it to a credit inspector

After getting the agreement for credit checking, it’s time to find legitimate credit-reporting agencies. The biggest names in that industry are: Equifax, TransUnion, and Experian. They will be the one to gather and verify the credit history of an individual including any possible aberrations.

Do the checking

Credit reporting agencies do the math of evaluating an individual’s credit report. They won’t be sending the raw data to commoners and have it decoded by themselves.

CRAs will be sending a thorough and easily digestible document with interpretations. Mostly, the credit report is graded using a rating system of 1 to 9: a rating of 1 is the highest possible and it means that debts and loans are paid on time, at all times and without delay; a 9 is the lowest possible rating and it means that the person still has tons of debts in his/her balance and he/she usually pays late.

Analyzing the report

There are agencies specialized in screening possible tenants. Agencies like the National Tenant Network do reports on the applicant’s payment history.

Now it’s your employer or landlord’s call if they will accept you or not based on the report they got.