How to do a Credit Check?
The major credit bureaus in the United Sates are Experian, Equifax, and TransUnion. These agencies collect information on millions of consumers and sell it to legitimate financial institutions and other entities that can demonstrate a permissible purpose. There are a variety of ways to obtain free credit checks, including contacting the credit bureaus directly. These bureaus all have websites that contain instructions on how to do a credit check once per year at no cost. It’s also possible to check credit using the link above or through other websites offering this service, but some of them require a fee. It’s advisable to request your free credit checks in writing because you will be required to disclose your Social Security number and other personal information. This can be accomplished via U. S. Mail if you prefer that option over using the internet.
Importance of a credit check
Your credit score and report are used as means to assess your ability to pay your debts in a timely manner. The most common scoring methodology is the FICO score originated by the Fair Isaac Corporation, and available with your free credit checks. The scores range from 300 to 850 and are based on several components of your credit file that are ranked according to a proprietary formula. The objective is to keep your score as high as possible, but especially over the 700 area. There is no magic number as to what will get you a loan or the best interest rate as lenders can use the score any way they want. When the housing market began imploding and mortgage defaults began to rise, many banks raised the bar for credit scores and other measures of your ability to pay. They will check credit thoroughly and most will ask for proof of income.
The major credit bureaus will assist you with how to do a credit check and also with correcting your record should you find inaccuracies or inconsistencies. It’s very important that you review every entry in your report and challenge anything that looks suspicious, or doesn’t match your financial statements. If you have problems or issues regarding how to do a credit check and get your record corrected, you can also contact the Federal Trade Commission.
How credit checks affect your score
Requesting free credit checks will not affect your score in any way. This is known as a “soft pull” because you are not applying for credit. If other companies or persons check credit to see if you might qualify for a credit card or loan, such prequalification is also considered a soft pull. Some employers will check credit as part of their background investigation before offering you a job. This will not affect your credit score, and will often be done without your knowledge. When dealing with the issue of how to do a credit check, most employment applications now contain a clause that specifically authorizes businesses to check credit as part of the hiring process.
A “hard pull” occurs whenever you apply for a credit card, loan, and most other forms of credit. Each time this happens, your score will be reduced by around five points. If your report shows a series of such entries over the past several months, lenders will view this as a sign of possible financial difficulties. When considering how to do a credit check for yourself, you want to do it in a way that does not generate a hard pull. So the best way is to check credit using the free reports guaranteed under federal law, and minimize the number of hard pulls to the extent possible. Only apply for the credit you really need and use it sparingly.