Credit Check

A credit check is a review of a consumer's credit report. It is not the same as a credit score. The credit report contains information such as account histories, payment records, outstanding balances, public records like bankruptcies, and a list of entities that have requested the report. Nationwide credit reporting companies—Equifax, Experian, and TransUnion—compile this information from data furnishers, which include lenders, debt collectors, and courts. A credit check may be performed by a lender evaluating a loan application, a landlord screening a tenant, an insurer underwriting a policy, or an employer considering a job candidate. The Fair Credit Reporting Act (FCRA) establishes permissible purposes for accessing a credit report. Credit checks are often categorized by the type of inquiry they generate. A hard inquiry occurs when an entity checks a credit report in connection with a consumer's application for credit, rental housing, or certain other services. This type of inquiry may be recorded on the credit report and can be seen by other parties who later review the report. A soft inquiry occurs for purposes that are not initiated by the consumer, such as account reviews by existing creditors, pre-approved offers, or a consumer checking their own report. Soft inquiries are generally not shared with lenders or included in credit-scoring models. Under the FCRA, an employer must obtain a consumer's written permission before obtaining a credit report for employment purposes. Consumers have specific rights related to credit checks. The FCRA allows consumers to request a free copy of their credit report from each nationwide credit reporting company once every twelve months. The official site for these free reports is annualcreditreport.com. If a credit check leads to an adverse action—such as a denial of credit, insurance, or employment—the entity taking the action must provide an adverse action notice. This notice identifies the credit reporting company that supplied the report and explains how to obtain a free copy and dispute inaccuracies. Consumers may also dispute incomplete or inaccurate information directly with the credit reporting company and the furnisher of the data. A credit check is sometimes confused with a credit inquiry, but the terms describe different things. A credit check is the act of reviewing a credit report, while an inquiry is the record that a review occurred. Not every credit check involves a credit score; some checks focus only on the report's contents. The frequency and type of credit check depend on the context and the applicable law. For example, employment-related checks require consent, while checks for firm offers of credit may not. The FCRA and other laws govern how credit information may be used and disclosed.

A landlord may run a credit check on a prospective tenant after obtaining written authorization. The tenant's credit report would then include a record of that inquiry, typically labeled as a rental or tenant screening inquiry.