Keeping an Eye on Credit Checks

Most people know that when you apply for a new loan or line of credit, the lender will check your credit report and background before approving your application. What some people aren’t aware of is that some lenders and credit card companies periodically request credit checks just to see if your status has changed. People who are particularly subject to closer scrutiny by lenders are customers who are late with payments, people whose balance due keeps increasing, and customers who go over their credit limit. If a lender decides that you’re not as good a risk as you used to be, they may lower your credit limit, increase your interest rate, or both.

However, in today’s uncertain economy and with the financial industry particularly hard-hit, lenders are making ever more detailed background and credit record checks for loan applications even from people with a good credit background. If you are concerned about protecting your credit score (as you should be), then it pays to check your credit prior to having a lender check it, and check it periodically to be sure it is correct.

When a lender requests a check of your credit, that request remains on your credit record. When subsequent inquiries are made, each of those companies can see how many times your credit report has been requested. If there are too many inquiries within a short period of time, your credit score could suffer as a result. Many people aren’t aware of this problem until they are suddenly denied credit because there have been too many inquiries in too short an amount of time. But your credit score won’t be affected whenever you do your own check of your credit report.

Checking your own credit report is a good idea so you can see how lenders might view you as a potential customer, and to see whether or not there are errors or unauthorized checks of your credit. Credit reports also give you information about how your credit history stacks up against the average credit scores of the population.

Everyone is entitled to one free copy of their credit report each year from the three credit bureaus - Equifax, TransUnion, and Experian. You can request free reports online from each of these three companies, or you can visit GoFreeCredit.com to check your credit. Because you can get only one a year, it’s a good idea to space your requests throughout the year - get Equifax, then four months later request TransUnion, then four months later get Experian, then four months later start again with Equifax. That way you’ll be checking your credit report for free three times a year.

Review your personal credit report regularly for errors, and take steps to remove anything that might be pulling your score down. There are things you can do on a regular basis to increase your credit score - do your best to pay your bills on time, keep your overall debt to earning ratio low, and don’t overextend your finances to the point that you can’t keep up with paying your debt. Especially in these trying financial times, creditors are being increasingly particular about who they lend money to. The more you can do to keep your credit report clean and your credit score high, the more likely you will be able to obtain credit when you need it.