When you are ready to apply for that next job, you may be surprised when you are asked to sign a waiver giving the employer the opportunity to check your credit. This may leave you with many questions about just what a credit check entails and what exactly it means to you. Understanding who can check your credit, what they will see and how that affects you will help you make better financial decisions in your future.
Who Has the Right to Check My Credit?
Your credit history is considered personal, and therefore private, information. Only certain organizations that have a legitimate business need to check it have the right to do so. This may include lenders, insurance companies, landlords, child support enforcement agencies and certain government agencies. Potential employers can also check your credit, but only if you provide written consent for them to do so. The credit bureau can also review your report, and you have the right to request a copy whenever you wish. Each of the bureaus must provide you with one copy of your history, not your score, each year free of charge, but after that they will charge a small fee for this information.
What Do They See on My Credit Score?
When someone checks your credit, they will see a lot of information about your financial history. This includes identifying information, including your date of birth, address and Social Security number. They will also see your credit accounts, including the type of account and your payment history. Any credit inquiries made into your history are also included. If you have any public records or collection items in your past, including information like bankruptcies, foreclosures, lawsuits, wage garnishments, liens and judgments, these will be included.
What Is the Difference Between a 'Hard' Check and a 'Soft' Check?
Some credit checks actually impact your score negatively. When you apply for a loan, for instance, and the lender pulls your history, that is recorded on your score. Too many credit inquiries in a short period of time can significantly lower your score. Other negative inquiries include IRS inquiries and inquiries from a debt collector. These negative checks are known as 'hard" pulls. "Soft" credit checks are those that do not impact your score, such as a tenant screening, personal credit check you do for yourself or an existing creditor or credit bureau's review of your file.
How Can I Improve My Credit Report?
The primary way you improve your credit report is by improving your financial situation. In other words, lowering the amount of debt you owe or making your accounts current will improve your scores slowly. Another way to change it is to have any errors removed. If you notice credit inquiries that you did not authorize, for instance, you can ask for proof that you did authorize the credit check. If the creditor cannot provide that proof, in writing, then the check will be removed. Send the inquiry in writing. Finally, make sure that the credit limits shown on your history accurately reflect the credit limits you have on your accounts. If they do not, have the creditors change them to lower your debt-to-credit-limit ratio.
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