There are a number of different parties who may wish to check an individual's credit. These include lenders who are considering offering someone a loan; landlords who are considering renting someone an apartment; and employers who are considering hiring someone for a job. When someone checks another person's credit, he will see a report listing the loans that the person has taken out in the past and a score representing his creditworthiness.
Credit Report
When someone check's another person's credit, what he is really checking is the person's credit report. A credit report is a dossier of information that includes reports of all the forms of credit, such as loans and credit cards, that the person has taken out in the recent past and the disposition of this account. For example, if a person paid the loan back on time, the report will reflect this; if he was delinquent in paying, this will be noted.
Credit Score
The findings of the report are entered into a formula and used to calculate a credit score, a numerical representation of the individual's creditworthiness. Credit scores range from between 300 and 850, with the majority of people having a score between 600 and 740. The higher the score, the more creditworthy the credit reporting bureaus that compile the score believe the person to be. To a person seeing the score, this may indicate that the individual is financially responsible.
Effect of Checks on Score
When a lender or other party checks a person's report, it may actually affect that person's credit score. This is because a credit report includes a record of all the parties who have recently checked the person's score. If one of the parties who checked the score was a lender from whom the borrower is seeking credit, the person's score will actually be dinged a few points, as this may indicate the person is seeking to take on more debt.
Considerations
No everyone is allowed to check an individual's credit report. Under U.S. law, the checking of another person's credit report is limited to parties who have a "legitimate business interest" in knowing that person's credit history. In addition, in certain cases, a party will have to receive the person's permission before conducting the check. For example, in most states, employers are required to receive written permission from an individual before checking her credit.
0 comments:
Post a Comment