When you are heading out to buy that dream house, car or looking to apply for a home equity or mortgage loan, the lender will perform a credit check.
The Credit Check Form authorizes the potential lender to access financial records pertaining to the consumer and what the consumer is looking to purchase or secure for personal or business needs. Consumers must consent to this before making a purchase.
Credit is checked against three different sources (called "Consumer Reporting Agencies"): Equifax, Experian and TransUnion. These agencies fall under the auspices of the Fair Credit Reporting Act( FCRA). The FCRA is the watchdog for financial information being used in consumer reports (mainly credit check reports). This act is part of the Federal Trade Commission.
Many lenders utilize credit collection agencies to access information about consumers. The credit collection agencies are always outside third party sources. The agencies notify Equifax, Experian and TransUnion about the credit history of the consumer.
The information used to determine someone's credibility for purchases and securities is based on several factors: the amount that is currently owed-examples: mortgage, car payments, other loan payments (student, personal), any evidence of delinquency on payment history, current available funds in banks and other financial institutions and employment history.
If there is more than one individual applying for credit, then the other individual will also receive a credit check as well.
Recently, the process of using a Credit Check Form has come under scrutiny
because it raises the issue of fraud activity. Some lenders have hired credit collection agencies that have gained personal financial information illegally. Once they have obtained this information, the agencies use pressure tactics to influence people to pay off bad debts. It has been reported that agencies using information obtained illegally are in direct violation of the Fair Credit Reporting Act. New changes to the Fair Credit Reporting Act have been mandated to
protect the rights of the consumers.
Since the credit check process has come under fire, Experian has instituted
"software as a service" to thwart any illegal practices. The software combines
new technology while protecting the personal rights of consumers.