A person’s credit history and background information may affect his ability to borrow money, and sometimes even to obtain a job he is interested in. Understanding what information is contained in their credit history and background report and how it is recorded will help people improve their credit and overall financial situation.
A person’s credit history is made up of information about money she has borrowed in the past as well as how she has gone about repaying borrowed funds. The three major credit bureaus--Equifax, TransUnion and Experian--keep track of people’s credit history in the United States. When lending agencies such as banks and mortgage companies are considering giving a person a loan, they review her credit history by running a credit check before they make a decision.
Basically, any information related to personal credit will be show up in a person’s credit history. Applying for, obtaining and using credit cards are all recorded, as well as the remaining balance on credit lines and payments made. When a payment is late or missed, this is also included in the credit history. The same is true for bank loans, home mortgages and any other debts. Closed accounts remain as part of a credit history for several years, as do bankruptcy filings. A background check examines a person’s criminal records, commercial records and financial records. A background check may search municipal, state and federal court records and sex offender databases.
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Implications of Credit
A person’s credit history is used in a variety of ways. His credit score, for instance, is calculated based on information found in his credit history. Credit score is a number between 300 and 850 that sums up an individual’s use of credit and reliability. It is calculated using details of credit history such as the number of credit cards an individual holds, the balance on them, and whether or not payments have been made on time on credit cards and loans. A lender may not extend a loan to an individual who has negative information on his credit report.
Implication of Background Checks
Businesses and other organizations conduct background checks on a person’s credit for several reasons. For instance, some companies have adopted the habit of running background checks on all individuals applying for jobs, especially if those jobs involve working with money or sensitive information. Landlords often check the background of a potential tenant, since she will be entrusted with the care of the property.
It is important that people do everything they can to make their credit history as clean as possible. One of the worst things a person can do to his credit history is file for bankruptcy. The problems that lead to bankruptcy, such as missing payments on credit cards, will also damage credit scores and histories. Making sure to make all loan and credit card payments on time and keeping debt under control is the best way to keep a clean credit history.
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