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Important questions answered on credit check

What is involved in a credit check?

A credit check is an inquiry into your credit score that is initiated by a bank or money lender to whom you have applied for a loan of any kind, be it for a business venture, for buying property, for the purchase of a car or your child’s education.

Important questions answered on credit check
Credit checks will also be initiated by a credit card issuing bank as a first step in processing your application for a credit card with them. A credit check is usually a necessary aspect of any financial transaction where a company offers you some good/services on credit.

Do I have to authorize a credit check?

There are two kinds of credit check inquiries. A hard inquiry which should be initiated following your application for a loan, mortgage or credit card would necessarily have to be authorized by you. However, a soft credit check may also be conducted by a prospective employer to whom you have applied for a job or even by a landlord on a potential tenant. Usually, such soft credit inquiries may be carried out as part of the routine background check done by the individual/company and may not require your authorization.

How does a credit check impact my credit score?

Hard credit inquiries made by banks, money lending institutions or credit card companies take stock of your credit scores over a period of 6 years, factoring in defaulted or missed payments. A hard credit check inquiry may adversely impact your credit standing. However, usually these credit score alerts drop off as and when you regularize your payments and so may not have a significant long term implication on your credit score.

Soft credit inquiries are usually done as a pre-employment background check and are initiated by a prospective employer through a credit assessment bureau to assess your trustworthiness. Soft credit check questions will not usually impact your credit rating.

Who is entitled to initiate a credit check and when?

When you apply for a credit card or for a loan or mortgage, the organization that offers you the line of credit is entitled to carry out a credit check on you, pending your authorization of the same.

Disclaimer:
The information available on this website is a compilation of research, available data, expert advice, and statistics. However, the information in the articles may vary depending on what specific individuals or financial institutions will have to offer. The information on the website may not remain relevant due to changing financial scenarios; and so, we would like to inform readers that we are not accountable for varying opinions or inaccuracies. The ideas and suggestions covered on the website are solely those of the website teams, and it is recommended that advice from a financial professional be considered before making any decisions.

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