Lenders, before offering the borrowed amount, they check the persons who request the loan in order to determine who qualifies for the loan, which interest rate is optimum for a certain person and what credit limit should each person have.
All the financial history of a person is recorded by some special agencies, called credit bureaus, and these agencies offer lenders the necessary information about the loan applicant. This operation is often referred to as credit check, and it means to check someone for a credit.
The most used tools for checking someone before offering him/her a loan are the credit report, and the credit score, which is calculated by summing up the elements in the credit report. The credit report is a historical presentation of all financial activities of a person, and it also includes personal, identification information, public record information and recent inquiries. The credit report can be requested for credit check by lenders, creditors, employers, insurers, government agencies or anyone with a legitimate need for the information.
Credit check using the credit score can be done by comparing someone’s credit score with the median value of the best clients of the credit institution. Credit score also predicts if someone is trustworthy to get a credit, and positions that person on a scale. That scale has values between 349 and 849 and intervals’ meanings are: below 600-poor credit, 600-650 fair credit, 650-720 good credit and 720-850 best credit. The credit report can be requested from one of the three nationwide credit bureaus (Equifax, Experian and TransUnion). Even if you are individual just checking your credit report, or a lender requesting for valuable information about your applicants, it is always better to check all three versions of the credit report, because there can be little errors in it. These errors can easily be corrected, but it is better to have a correct and clean credit report than having unwanted surprises in the last moment. Of course that if you request your credit report from one of the bureaus and you notice mistakes, you can ask them immediately to correct them. Usually it takes no longer than 10 days for your situation to be clarified.
The credit check
Credit report and credit score are, as I said the most often used tools for checking credit, but some companies might also have their own scoring and evaluation system. There are a lot of companies which recently appeared, and they offer services like evaluation for credits, and some of these companies make this credit check for free. Free credit checks might sound like a great opportunity but in some cases there have been reported errors in these credit checks, so maybe you would like an old company, with tradition to do the credit check. Of course, the free credit check is great when you just want to verify your credit situation.
Taking into account that we are currently facing a financial crisis, all check criteria for credits or any kind of loans are very strict, and only applicants with a very clean history and with good references can get credits nowadays. Few months ago, almost a year ago, there were plenty of advertisements like “buy now pay later no credit check” and “no credit check loans” and a lot of people were attracted to these messages, and applied for credits. In most of the cases, the applications were successful, and a lot of cash has been released on the market. The crazy consumerist era began, and because a lot of people have borrowed money from the banks and had no resources to pay them, the crisis started to make its presence felt among people.
Checking credit is the most important step in the credit process, because it grants that the person who borrows the money will be able to pay back the lent amount. There have been reported situations when people presented clean credit reports, but in time they lost their jobs or they have been in impossibility of working because of disabilities, and they couldn’t make the payments. For protecting themselves against this type of situations, finance companies usually make insurance policies for the debtors. In case the debtor is not able anymore to make the payments, a part of the money amount is insured and the lost is not that big for the credit company.
Finance companies have reconsidered their strategies since the economic environment went on a descendant trend. You won’t see anymore “no credit check” and “buy now pay later no credit check” announcements, and this happens because these companies want to be sure that the people who lend the money will pay back in time, not forced by the circumstances.
The credit check
Credit check is done by analyzing all the sections in someone’s credit report. The information related to finances is usually stored in the report for seven years, and if the person has filed for bankruptcy, the information will be visible in the report for the following 10 years after filing. Of course that having on your credit report bankruptcy is not a good point in calculating the credit score. Take care about all the aspects of your financial life, if you know that in the future you will want to apply for a credit to make some important purchase for you and for your family. It is very important to keep the credit record clean, because it is like a personal card in the financial world. That is your brief presentation in front of the lender, and it comprises the most aspects related to your life. For the lender is important to offer the money to someone who is trustworthy and will pay back, and for you is important to get as much as you want, at a good interest rate. Credit check is a normal process, which brings benefits for the both parts.
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