How to Check a Credit Rating

Businesses may check clients' or tenants' credit reports to avoid extending credit to a person with a low credit rating.

How to Check a Credit Rating
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Overview
As a businessperson you are likely to find it good business practice to extend credit to reliable customers. However, you need to have some way of knowing whether a person is in fact a good risk. For that, you need to be able to check a credit rating. For most businesses, an account with one or more major credit-reporting agencies (Equifax, Experian and TransUnion) is sufficient. Many landlords prefer to use a specialty firm that provides information in addition to credit ratings.
Step 1
Open an account with one or more credit-reporting agencies or with a tenant-check service for property rentals. You should have accounts with all three major credit-reporting agencies since they each keep separate records or use a third-party service to do this for you. Accounts with credit-reporting firms also allow you to report delinquent accounts and bad debts, which strengthens your position should legal action become necessary. For landlords, specialized services are usually better because they include rental history and criminal background checks with the credit-rating check.
Step 2
Ask the customer for the information you need (usually it's easiest to have a form printed up for customers to complete). At a minimum you will need the person's full name, address and Social Security number. In addition, you need to know the person's place of employment and income. If the person has moved or changed jobs recently (within the past year), ask for the previous address and/or employment information. Finally, provide the details of the proposed credit extension (for example, a charge account with a $1,500 limit or an apartment renting for $800/month).
Step 3
Enter the customer's information on the credit-reporting agency's online system. Each company has its own data entry software, but they are similar and user-friendly. Rental credit-check services will often do the data entry for you since there is frequently a good deal of additional information involved.
Step 4
Review the credit report and print a copy for your records. The report includes the customer's credit score plus information on income and employment. You will also see data listing serious credit problems such as bankruptcy and any record of writing bad checks. Finally, the report includes "trade line" data, which is a detailed listing of current accounts including balances, monthly payments and current payment status. Many tenant-check services allow you to set parameters for accepting or rejecting an application (credit reports don't do this). For example, you can set up a template with questions such as "Has the tenant been evicted in the past 36 months?" and a coded recommendation based on the answer. Once you've reviewed all the information in the credit report, you'll be ready to make an informed decision about extending the person credit.
skill
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tip
Reporting problem creditors is strongly encouraged. In addition to providing you a better legal position, the information is crucial to making the whole credit-reporting/checking system work.

Ultimately extending credit to a potential customer is your decision, not the credit-reporting agencies. You should take advantage of their informational resources and guidelines to help you to decide how much credit risk you are willing to accept.

tips
Reporting problem creditors is strongly encouraged. In addition to providing you a better legal position, the information is crucial to making the whole credit-reporting/checking system work.
tips
Ultimately extending credit to a potential customer is your decision, not the credit-reporting agencies. You should take advantage of their informational resources and guidelines to help you to decide how much credit risk you are willing to accept.
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credit check report history score Experian Equifax TransUnion risk account rating
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credit
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report
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history
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score
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Experian
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Equifax
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TransUnion
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risk
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account
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rating

Resources
reference
Equifax.com
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Experian.com
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TransUnion
resource
Online Tenant Screening