Wednesday, July 22, 2009

Is a Background Check Needed for a Line of Credit?

Background checks such as character references and criminal history checks are usually not needed for approval on lines of credit. There could be exceptions to this if the bank is extending an unusually large credit line. However, in nearly all cases the bank or lender makes only a standard credit check.

Permission

    The lender will seek your written authorization before conducting a formal background check -- if one is required. Background checks are more common in employment situations during the hiring process as companies check references, driving records, criminal records and more.

Credit Reports

    It's more likely that the creditor will order a credit report from one of the major credit bureaus: TransUnion, Equifax or Experian. Approval will be determined by information on your application, such as your salary and employment, along with information from your credit report including your credit score. Credit scores are three-digit numbers ranging from 350 to 850, and scores of 720 to 750 or higher are considered outstanding. Creditors establish their own lending standards, so it is possible to be approved with scores in the 500s. However, a 620 score is generally considered the cutoff for "good" credit.

Accuracy

    It's important to truthfully fill out the credit application. Information on the credit application should be the same as information listed on your credit report. Inconsistencies could lead to delays in processing your application while representatives contact you for follow-up questions.

Loan Officers

    Contact the lender and ask about the loan approval process if you are really concerned about background checks. Simply ask the representative to explain the bank's credit review process and standard expectations when approving lines of credit.

0 comments:

Post a Comment