Credit Checks : What They Are And What You Need To Know

The fine print of many financial applications, lease and rental agreements and other common forms of contracts often contact an easily overlooked clause which gives the other party permission to perform a credit check on the applicant. Many people who inspect this fine print wonder "What is a credit check and why does this person want one?"

Simply put, credit checks are a form of confirming a person's history of repaying loans and other forms of credit. This is often useful information to potential landlords, banks and creditors. If you were in their shoes, you would certainly be interested in knowing how likely the applicant would be to honor their financial agreements.

Many people are rightly worried about who has access to their important personal information contained in credit reports, and how their personal information is to be used or shared. Creditors, lenders, insurers, businesses providing lines of credit, and others can access your credit data. Fortunately, rules for credit checks are clearly defined by the Fair Credit Reporting Act.

You must give your employer signed permission to obtain a copy of your credit history. They are limited in how this information can be used or shared with others. Should your credit report be obtained without your express written permission, they may be subject to legal action.

Now finally people may wonder if they can access their own credit history or perform credit checks on themselves. They can, under the Fair Credit Reporting Act a person can request their credit information three times each year, once from each different credit reporting company.

It can take up to fifteen for you to receive your credit history but once it arrives you will be able to see what kind of information is used to evaluate your financial status. One of the more important things in your credit history is your credit report scores. These are the numeric representation of you entire credit history. Many loan applications ask for you to provide a credit report with score in order to better quantify level of risk as an investment. By knowing this score ahead of time you can gain a leg up in loan applications.

It is important to know your credit history. Understanding the finer points of your credit history illustrates why banks and other financial service providers review it before agreeing to do business with you.

Article Source: http://www.contentspool.com

Most contracts contain a clause allowing the other to perform credit checks on the signer. Even if people see the clause they often don't know what it means. Any company loaning money to someone needs to obtain a credit report with score on that person in order to determine whether or not he or she is a good credit risk.

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