In a situation where you go to a lender like a bank, a credit card company, or a credit union, to ask for new credit, a credit check will be required.

Credit Check - Meaning and How it Works
Credit Check – Meaning and How it Works

A credit check is also called a Credit search. This is when a company seeks your consent or approval to examine or study your credentials from your Credit history to understand your financial conduct. For this to be done a legitimate reason must be presented probably because you borrowed a loan.

Credit Check allows lenders to make a vital decision on if it’s safe or quite risky to really give into your quest for new getting loans. And once your credit history shows consecutive unpaid payments in a role or debits, it looks irresponsible to a lender and that could terminate any request of yours from the lender.

Your Credit history includes a 3-digit number credit score which shows how perfect your Credit is. The higher the digit, the better. 

Types of Credit Check

Basically, there are two types of Credit checks which include: Hard and Soft Credit Check

Hard Credit Check; is when a lender asks for your Credit History before giving you a new account. The Hard check has a temporary negative effect on your score. Most times hard checks are tagged as a red flag for lenders because they might consider you to be desperate for credit which is highly risky from a lender’s perspective.

Soft Credit Check: This is when you request a personal Credit History, or when someone else requests your history for reasons other than giving you new credit. Doing this has no effect on your Credit Score.

How to do a Credit Check?

You can visit annualcreditreport.com; it’s the only authorized website to go through the process online. You can also Visit cr credit bureau online to get the process done without living in your comfort zone. Just visit the site with your personal details and get it done as soon as possible.

Requirements

There are things you need to do a credit check. And in this section of the article, we will be listing the requirements for you. Check them out below;

  • Name
  • Date of Birth
  • Current and previous home addresses
  • Social security number or ITIN (Individual Taxpayer Identification Number),
  • Identification number including SIN, driver’s license, and passport.

And these are things seen in a Credit Report when checked.

  • Debts sent to a collection agency
  • Previous bankruptcies
  • Past and current credit accounts and balances(loans, credit cards, lines of credit, etc)
  • Hard search during the past 36 months.

Why should I do a Credit Check?

  • Doing a search shows your stand before seeking a loan or credit card. There is basically no penalty requesting for a personal Credit report.
  • Insurance companies, landlords, and employers might request it to be done by them.
  • According to RCMP recommends, doing the search frequently, is a defense against identity theft. This is because once someone impersonates you and applied for a credit, it will show up on your Credit History.

How much is a Credit Check?

Well, it all depends on why it is required and the information needed. There are three major credit bureaus (TransUnion, Equifax, and Experian) and they all roughly charge a fee round about $25-$75 per applicant. And it takes a week max to get your process down.

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