When one applies for a loan or credit, his or her credit background will be checked to determine the credit worthiness. This process is called credit check and is done by different organizations or entities that may keep data of a particular person’s credit history. However, it may also be done by simply making telephone calls that will serve as a point or point of references about one’s financial history. This practice has become more usual to developing countries where financial transactions such as acquiring funds through borrowing have become a norm and a strategy to balance one’s business or financial status.
A credit check will involve a lot of factors. The first one usually is the credit score or the rating that was specifically made to easily determine the financial history of a person. There are many different agencies one may ask about credit background but almost all of them uses FICO. The rating of FICO will start at 300 for the very poor credit score while a 600 score will be start of being remarked as a good credit rating. The scores 700 up are the ones considered to be excellent.
After the credit scores, credit reports will also be checked.This will reflect the existing and recently closed credits and loans. It will also show the remaining balance and the person behavior of payment. A credit report will categorize the different credits the person has. If a person used to have a student load, three credit cards and a recent mortgage loan, then there will be five (5) items in his or her credit report.
But it will be not just banks or credit card companies that do credit checks. It is also done by utility companies whenever a person will apply for a connection for telephone or electricity. A bad credit history will not really be directly used for the application be denied but the company may request for a deposit as a form of security for the acquisition of the service.
Credit checks can be sensitive so the release of information of it is very restricted. This is to protect the person and his or her financial accountsfrom being accessed by unauthorized individuals. It can also be done by the person himself or herself to also check the status of his or her credit and make sure that other people are not doing any unauthorized use of his or her lines of credit that may affect him or her negatively. More more information, check out checking account promotions and money saving tips.