Whether you are applying for a mortgage, a new apartment, or a job in the Philadelphia area, chances are you will be asked to sign a form allowing a credit or background check to be performed. These types of checks have become more common in recent years as technology has made information more reliable and easily accessible. Before you grant permission for a credit or background check, take some time to find out what they reveal about you.
Verification of Data
Background checks are performed to verify the information you provided on your loan, rental, or employment application. Due to time lags between informational database updates, the most current information may not appear on your credit report. Address information may not match due to a recent relocation. Discrepancies also occur because the reports tend to pick up the addresses where bills are sent, even if you don’t live there. If you have moved out of your parents’ house but never got around to changing the billing address on your credit cards, credit agencies may report a different address from the one listed on your application.
Last-name changes for someone who is recently married is another pieces of data where mismatches are common. Also, prior employment may be verified as part of a background check, so be sure to include all previous employers on your application if asked for this information. Loan officers, landlords, and human resource personnel won’t be surprised to see these types of minor differences, but it’s still a good to idea to explain any discrepancies you are aware of ahead of time.
What’s Your FICO Score and Why is it Important?
Your FICO score is computed using a complex mathematical formula that takes into account all the information on your credit report. The score is based on many factors, including total outstanding debt, number of open credit lines, frequency of late payments, and the length of your personal credit history. Because so many factors are taken into account when calculating a FICO score, there is no official definition of what constitutes a “good” score. Different lenders have varying ranges of what they consider acceptable scores — partly because they take these scores into account alongside other factors, such as income.
How You Handle the Debt in Your Life?
Almost everyone has debt. What distinguishes good applicants from others is how they repay their debt. Do you allow payments to slide past the due date and incur frequent late fees? If so, the pattern of lateness will be evident on your credit report. Do you open every credit card offer you receive to collect freebies or discounts at your favorite stores? The more debt you have available to you, the more worrisome it may appear to someone evaluating your credit — even if you are currently making the proper payments. If you do have some issues with past debts, be prepared to offer an explanation and discuss your plans for repayment.
Repairing Your Credit
If at first your background check prevents you from getting that loan or apartment you applied for, you may need to take some time to repair your credit. Download a copy of your credit report and ensure that the information is accurate and reflects a true picture of your credit history. Credit agencies have a formal dispute process in place if you find inaccurate information. If you need assistance with interpreting your report, contact a local consumer credit counseling agency, such as Clarifi, for help. A credit counselor can also offer tips on how to improve your credit going forward.
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