The credit score is a very important indicator of a person's financial capability and solvency. Credit checks are conducted to find out the credit score and from there to determine whether a particular individual can be given a loan or any credit. This credit score is referred to by banks and financial institutions to estimate the repayment capacity of the individual. The credit score also returns to a great extent the past repayment track record of the individual for any loans he might have taken.
This credit score is calculated using the FICO (Fair Isaac Corporation) score, which itself is determined by the usage of complicated statistical and analytical methods. While there are other effective methods like Beacon and Empirica also to calculate the credit score, the FICO score is more relevant as it provides a lot of important and relevant details about an individual's financial track record. It displays how regular and punctual he has been in making the repayments, the manner in which he has used his current debt as against the total debt available to him, the duration of the credit given to him, the different types of credits that are being availed by him and the most recent credits that have been offered to him. FICO scores of anything below 600 is a bad one while anything above 720 is very good. The credit report can be obtained from any of the reporting agencies who adhere to the FACT Act and that are (Fair and Accurate Credit Transactions Act)
The credit checks are also utilized by house owners to find out the financial capability of the prospective tenant before renting out the premise. It is also used by employers prior to handing over employment to the prospective employee. Generally, it is used by lenders before advancing any loans to the potential debtor.
The credit-rating agencies who conduct these checks on individuals as well as even on companies charge for their services. Three of them – Equifax, TransUnion and Experian are the most renowned ones in the US. There are other independent agencies as well, who will also do the job for you.
Basically these reports dwell on the following:
• Any judgments passed by the County Court over the past 6 years regarding any financial anomalies including the date and reference made.
• Any instance of insolvency that has surfaced that is not in favor of the tenant over the past 6 years.
• Any example of Insolvency that has been filed against the individual in the past 6 years.
• Does he operate under different names?
• Verification of the proper address details by checking the electoral register.
• Tracing other financial statements that associate the individual with the address that has been provided currently.
• Instances of any credit searches that have occurred over the last half year.