Are you a person looking to check the credit score of a potential employee, a future tenant, or an interested client? If you're going to do it, you need to do it right. Here are a few things to remember as you go through the process.
You need to be well aware of the protections that the law affords to the average person out there. When you run a person's credit, you have to first have a plan for why you need that information and what you're going to do with it. Are you going to use that information to exclude a person or are you just interested? How low will the score have to be to negatively impact a person's application? Think about these things before you decide to run an individual's credit. According to most experts, these steps will help you conduct checks in a way that's both useful and legal.
What is permissible use?
According to federal law, you can only use a person's credit report for use with a credit transaction, for employment purposes, for insurance purposes, and for a few other limited and legitimate business needs. It is important that you have a legitimate purpose for trekking into someone's financial life. Many experts suggest that employers in the financial industry should check the credit of their potential hires. For some other industries, credit checks might be much less useful. You must be sensitive to the rights of consumers, and you should be wary of misusing credit reports. Experts suggest that it's right to err on the side of not checking credit unless you are sure it's necessary.
Getting permission to run a credit check
According to the law, you must tell the person before you run a credit check. They must give their written permission, and they will have to provide their Social Security information. These things cannot be waived, and if you try to check a person's credit without written permission, you could get into trouble.
Finding the right credit service
If you've succeeded in getting permission, you will have to choose a credit agency. The primary credit reporting bureaus are Experian, TransUnion, and Equifax. They can provide you with relevant information for all transactions. Employers should consider an employment-only check if they have no legitimate interest in lending money. You should know that credit reporting agencies charge for every report, so you can expect to spend around 15 bucks on every report.
What do these results mean?
You've run the report, and now you've got to do something with the information. You should establish a system to assessing credit checks before you run the report. Decide what a good score is from the start, and note things that would keep you away from an application. This will protect you against charges of discrimination.
You can expect to get back a report that grades a person on a one to nine scale, with a one being the best. Even with these simple numbers, it's best not to overreact. Some reports suggest that three in four credit reports contains false information, so you should dig deeper after getting the report.
Some experts suggest that you should give people a chance to respond to negative items. They may have legitimate reasons for some of the things on the report, and you could be missing out on a good opportunity if you fail to follow up.
Why not do a test run?
Before you start running another person's credit, you might start with your own. The good news is that you can run your own credit for free once per year. You will get a full report. It is important to note, however, that your free report will not include a score. You'll have to pay the fee to find out your score.
This can have many benefits beyond just providing familiarity with the process. A test run will allow you to learn more about the various elements of a credit report. You will learn how to analyze the results, and you'll get to check your own issues at the same time. Perhaps most importantly, you will get a good idea of how easy it is for a negative item to sneak onto a report. This will provide important perspective as you begin to analyze other people.
