One of the most overlooked features in many contracts such as applications and lease agreements, is a statement giving the right to perform a credit check. Many people don’t understand what it means even if they do see it. Be careful to notice whether this clause exists in any contract you sign, and decide whether this is really what you want to do.

Simply put, credit checks are a form of confirming a person’s history of repaying loans and other forms of credit. This is often useful information to potential landlords, banks and creditors. If you were in their shoes, you would certainly be interested in knowing how likely the applicant would be to honor their financial agreements.

Credit checks involve sensitive personal data. Therefore, many people are concerned about precisely who they’ve entrusted with their records. Fortunately, the Fair Credit Reporting Act has established unambiguous rules governing credit checks. Your credit data will be accessible to any business giving you a line of credit, to your creditors themselves, and to your insurers.

Employers have no inherent right to view an employees’ credit history. In order to view an employees’ credit history, employers are required to obtain written permission before requesting a copy of your credit report, and they could face legal consequences if they obtain your credit history without first receiving written permission.

It is possible for you to perform your own credit checks on your own credit history. The Fair Credit Reporting Act states that you have a right to know what each of the credit reporting companies have on record about you.

It’s imperative to obtain a copy of your credit history, because you need to know what information is being used by lenders to evaluate your financial status. One of the most crucial things to know is your numerical credit report scores. This is a summation of everything in your past having to do with credit. Most lenders will want to see a copy of your credit report with score before they can assess how wise it would be to give you a loan. Get the upper hand and find out what your score is before they ask; this will give you the upper hand when applying for a loan.

It is important to know your credit history. Understanding the finer points of your credit history illustrates why banks and other financial service providers review it before agreeing to do business with you. In order to protect yourself from identity theft, it is vital to know and understand your credit history, and to know how to control access to it.

Most contracts contain a clause allowing the other to perform credit checks on the signer. Even if people see the clause they often don’t know what it means. Any company loaning money to someone needs to obtain a credit report with score on that person in order to determine whether or not he or she is a good credit risk. They need to know how much debt a person has, whether they can afford to make even more payments, and whether they usually make their payments on time. Credit report scores can tell them this. The Fair Credit Reporting Act also lets individuals see their own credit reports and score.

- Daniel Lesser