Individuals need to know their creditworthiness always by checking it. And also take the necessary steps to improve your creditworthiness if it is not good. When you want to apply for a loan, rent an apartment or when looking for a new job. your credit score will be checked and your report examined first before you will be considered. In this article, we will be discussing the list of things to do before a credit check you need to know.
A credit check provides employers of labour, banks or lenders, and landlords with a summary of your credit history and financial behaviour. That is why we can say that credit checks help or plays an important role in determining an individual’s creditworthiness. Before any Credit check is carried out, ensure you do the necessary things and present yourself with a clean slate.
What Is A Credit Check?
A Credit check can be described as a process whereby a company looks at an individual’s credit report to understand their (individual) financial behaviour or history. Conducting a Credit check gives access to information about the types of loans you have, your payment habits, and your existing and past payment habits so that they will know your risk level as a borrower.
The List Of Companies That Can Conduct Credit Check
- Banks and Building Society.
- Credit Providers.
- Employers ( they might not have access to see your full report).
- Letting Agencies And Landlords.
- Mobile Phone Companies
- Utilities Suppliers (for example Electricity, Gas and Water).
The List Of 7 Things To Do Before A Credit Check
In this section, the list of things to do before a credit check will be discussed. Check below for the list.
You Need To Obtain A Credit Report First
While preparing for a credit check, one of the things to do before a credit check is to obtain a credit report. Your credit report will contain the details of your credit accounts history, and your credit cards, which will include loans, credit cards and other credit accounts. Your credit report will also include information on any late or missed payments, accounts in collections and bankruptcies.
When you get a credit report, it will help you to review your credit history and make sure that it is correct and up to date. You are entitled to get a free credit report from all three major credit reporting agencies at least once a year. The three reporting agencies are Experian, Equifax and TransUnion. You can access your credit report by visiting this website.
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You Can Check Your Credit Report If There Is Any Error
The second on the list of things to do before a credit check is to review the credit report you have obtained for errors. Any error found on your credit report will hurt your credit score. And will also go a long way to hinder your chances of getting credit approval.
Some of the errors that can be found in credit reports include fraudulent accounts, incorrect account balances and incorrect personal information. After checking for errors on your credit report and you find out some, you can dispute them with the credit reporting agency. The agency is required to investigate the dispute and make the necessary corrections within thirty (30) days.
You Can Pay Off Any Outstanding Debts
After going through the credit report you obtained and found out there is still an outstanding debt, One of the lists of things to do before a credit check is to pay off the outstanding debts. Leaving an outstanding debt before applying for a credit check will have a great impact and affect your creditworthiness. Even if you have multiple debts, create a plan that will enable you to know the debts to pay off first according to priority.
Paying off your debts will help to reduce your credit utilization ratio. The credit utilization ratio is the amount of credit you are using compared to the total amount of credit available to you.
You Can Avoid Opening a New Credit Account
For an individual that already has existing credits, opening new credit accounts before a credit check will hurt your credit score. Among the list of things to do before a credit check is to avoid opening new credit accounts. This is a good step because once you apply for new credit, the lender will conduct some inquiry about your credit history and this can reduce your credit score.
So it is important for individuals looking for credit to avoid opening new credit accounts before the credit checks. If on the other hand, it is necessary for you must apply for a new credit, you must do so after a credit check has been conducted.
Try And Reduce Your Credit Utilization Ratio
The credit Utilization ratio can be said to be the amount of credit available to you. Reducing your credit utilization ratio is on the list of things to do before a credit check and it is very important in determining your credit score. Your credit utilization ratio should; always be below 30%.
If the lenders check and find out that your credit utilization ratio is very high, it can give a signal to the potential lenders that you are at high risk of defaulting on payment of your dent and this will hurt your credit score. Pay off some outstanding debts, don’t use your credit cards frequently and request an increase in your credit limit to reduce your credit utilization ratio.
Try As Much As Possible To Avoid Late Payment Of Debts
Paying off your debt obligations later than the due date can have a significant impact on your credit score and reduce your creditworthiness. Among the list of things to do before a credit check is to always make all your payments on time. Your payments referred to here includes credit card payments, loan repayments, and utility bills payment. Making late payments can remain on your credit report for up to seven (7) years and will always hurt your credit score. You can decide to set up automatic payments or create a budget to prioritize your bills.
You Need To Monitor Your Credit Score Always
One of the lists of things to do before a credit check is to monitor your credit score always. There is the possibility that your credit score will always change due to your credit behaviour and financial habits. Monitoring your credit score will help you to be focused and improve your credit standing. It will also help you to see any error or fraudulent activity on your credit report on time. You can get your credit score from any credit monitoring services or credit card issuers free of charge.
It is very important to always have a credit check as it is an important aspect of life it will help you when you are applying for loans, renting apartments and looking for a job or employment. In the above sections, we have highlighted the list of things to do before a credit check and all you need to know. If you follow the seven (7) steps mentioned above, you will be in a better position to apply for any credit and get approval.