Free Credit Report

A credit check is a common screening process that is used to determine a customer's creditworthiness. You may receive a credit check when you apply for a loan, open a bank account, or even rent an apartment. Many consumers, however, are unaware of exactly what is involved in a credit check. Provided here is a quick overview of the process.

The Credit Score
A credit score is a three digit number that gives an overall glimpse of a consumer's credit history. A score above 650 is generally considered "good," although different lenders use varying criteria. There are three major credit bureaus, and each uses its own proprietary formula to determine the credit score. Therefore, your scores may be slightly different from each credit bureau. Many lenders perform a credit check with all three to develop an average.

The Credit Report
Your credit report is a detailed list of your current and former financial obligations and your history of payments on those obligations. Normally, the credit report goes back seven years. However, bankruptcy and judgments stay on your record for as long as ten years. Late payments, chargeoffs and other negative actions will appear on your credit report and count against your credit score.

Your current balances also have a bearing on your credit score. Holding several credit cards with low balances is preferable to holding a single card that is at the credit limit. However, holding too many credit cards can also reflect negatively. It is better to hold a variety of loan types.

The Results of a Credit Check
Different companies have different reasons for performing a credit check. If you are applying for a high-dollar loan, such as a mortgage, your credit report will likely be scrutinized. However, if you are renting an apartment, the landlord may be primarily interested in your rental history. If you are concerned about your credit check, it is generally best to be honest. If there are no surprises in your credit history, the lender may be more likely to grant you an exception, particularly if there is a good reason for any black marks.

The Bottom Line
A credit check may be performed for many different reasons. You are entitled to receive one free credit report per year from each of the three major credit bureaus. It is worthwhile to obtain your credit report and check for errors or inaccuracies. Knowing your credit score will also help you to improve your rating, as well as explain any problems to a lender in advance.