A credit check is a process in which an individual or business verifies the credit history and financial standing of another person or entity. This typically involves obtaining information from one or more of the major credit bureaus, such as Equifax, Experian, or TransUnion, to determine whether someone is likely to repay debts on time and in full.
Credit checks are commonly performed by lenders before approving a loan or line of credit, landlords before renting out an apartment, employers before hiring an employee for a position that involves handling finances, and insurance companies when determining the cost and availability of coverage.
The information obtained from a credit check can include payment history, outstanding debts, credit limits, public records (such as bankruptcies or judgments), and inquiries made by other lenders about an individual's creditworthiness. This data is used to assess the risk associated with extending credit to someone, and to determine what interest rate, if any, should be charged for that loan or line of credit.
In summary, a credit check is a process used by various entities to evaluate the financial reliability of an individual or business before entering into a transaction involving borrowed money or extended credit.