What is a Credit Check?
A credit check is a report that pulls certain financial data about you. If you have ever gotten a loan, bank account, credit card, or line of credit or if you have ever rented a property, this information is stored in your credit report for several years. Three credit bureaus keep track of your credit history: TransUnion, Experian, and Equifax. The information that each of them has regarding your credit history may differ slightly depending on which bureaus your previous creditors use for reporting.
When a potential lender, landlord, or employer runs a credit check on you, they will receive a report from one or more of these credit bureaus so that they can see how you have handled your financial obligations in the past. The information in your report is updated on a regular monthly basis. Your previous and current creditors keep the bureaus up to date on your account status.
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What Information is Shown on a Credit Check?
In addition to your payment history with previous and current financial obligations, credit reports will also show your debt-to-income ratio. This number represents what percentage of your monthly gross income is used to pay your debts. This helps potential creditors decide if you can afford the additional loan you are seeking.
A credit check will also show your credit score. When you submit an application that results in a credit check, this is referred to as a hard inquiry. These types of inquiries can have a negative effect on your credit score in some cases. For instance, numerous hard inquiries made within a brief period can lower your credit score and can cause potential lenders to see you as a higher credit risk.
A hard inquiry will remain on your credit report for two years. Soft inquiries, on the other hand, do not affect your credit score. Employers or financial institutions that conduct pre approvals for credit cards and loans usually conduct this type of inquiry. Checking your credit for informational purposes is also considered a soft inquiry.
A credit check will also show information regarding any bankruptcy, evictions, debt collection reports, and other public record information that is related to your finances and work history.
The Benefits of Credit Checks for Businesses
Businesses conduct credit reports on individuals to make sure the people they employ and do business with are a good financial risk that will be less likely to have a negative impact on their company. Businesses need to obtain this information so that they can make the most informed decisions.
Businesses also have credit reports. If you are a business owner, any loans or credit you take out using your business’s EIN or Tax Identification Number will become part of your business’s credit history. Banks and other lenders will use this information to determine whether your business is a good risk for business loans and credit cards.
A business with a good credit history will be able to obtain loans quickly at lower interest rates, qualify for higher loan amounts, rent workspaces, buy property, and instill trust in investors who will view the business as a profitable investment going forward.
Why Choose eKnowID for Your Credit Check Needs?
It is extremely important for business owners to conduct thorough credit checks on potential employees and other companies before making any hiring or financial decisions. To conduct these credit checks, it is best to use the services of a reputable firm like eKnowID. We are a fully certified private investigation company that conducts credit and background checks on behalf of businesses.
Each year, we conduct approximately one million reports. Our comprehensive investigative methods are responsible for detecting 25% more negative background data than reports from other firms.
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We help business owners make the right choices when it comes to the hiring process. It is critical to verify an employee’s information to protect your business and assets. eKnowID is a member of various professional associations, including the Better Business Bureau, and the Professional Background Screeners Association. Get in touch with us today to find out how we can help your business make the best hiring and financial decisions going forward.
Credit checks are an essential part of conducting business in today’s world. To choose the best candidates to work for your company, you will need to dig into their histories and to make sure they are responsible, dependable, and likely to be an asset to you and your company. This is especially true if the potential employee will be managing any financial transactions for your company. Credit checks are just one of many tools that businesses can use for making the big financial decisions that come up every day. At eKnowID, we are available to help you get the information you need to successfully manage your business.