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What is a Credit Check?

By Sherry Holetzky
Updated May 16, 2024
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An action taken by a prospective lender to determine if a person meets its standards to be extended credit is called a credit check. This entails seeking a detailed analysis from a credit reporting bureau or agency. The report usually contains things like date of birth, Social Security number, current and in some cases previous address, employment history, current employer and income, and payment history for loans and other debts.

When a credit check is conducted, payment history is documented through items reported by creditors to credit bureaus. It includes information about timely payments — or a lack thereof. If the research shows a person to be a poor risk for repaying debt, the loan or charge card may be refused. In cases where credit is approved despite a less than glowing report, the amount of the loan or the credit limit may be lowered, the interest rate may be increased, or both.

Any time that a person applies for a loan or a credit card, or attempts to obtain store financing for a purchase, the lender will check the person's credit. Actually, most will request at least two reports from different sources and compare them. Three of the top credit bureaus are Equifax, Trans Union, and Experian, which was originally called TRW. These are well established, frequently used sources for credit information.

In the US, the Fair Credit Reporting Act of 2003 stipulates that any person may obtain a free copy of his or her credit report once each year from any recognized credit reporting bureau. There are certain exceptions that will allow individuals to get this information more than once per year, such as if they are denied credit, insurance, or employment, or if their fees or interest rates were increased within the last 60 days. Consumers can write to the credit bureau, include proof of the situation, and request a report.

Consumers may also purchase a report by submitting a written request to a credit bureau by mail or by ordering online. It is a good idea for people to keep track of what is in their credit report to help maintain good credit, not only so they can borrow money when they need to, but also to ensure that they receive the best rates.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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Discussion Comments
By anon85694 — On May 21, 2010

your credit score goes down if you have "repeated" checks in a short time as it shows that you are desperate to attain credit when you can't afford it and are trying lots of different places.

This is why, when applying for credit if you are turned down, do not constantly keep applying because you will always fail and your rating will plummet.

Focus on paying back current debt and getting your credit rating back up.

By anon44092 — On Sep 04, 2009

Yes It is true my in debt friend.

By malena — On Apr 15, 2007

I heard that every time your credit is checked your credit score is lowered. Is that true? And if it's true, why is that the case? That doesn't seem to make sense!

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