Any time that an individual applies for a credit card, store financing, or a loan, the lender runs a credit check. This credit check allows the lender to look at applicants' credit history in order to analyze their risk as borrowers and determine if they meet the standards to be extended credit. Landlords will also often run credit checks in order to determine if a tenant is at risk for not making regular rent payments on time.
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The information obtained during a credit check typically goes beyond just a credit score to look at past employment history, previous addresses, current income, and debt payment history. By looking at payment history and information reported by creditors and credit bureaus, a lender can better determine if a person is likely to pay back their debt on time. If the report shows that a person has had difficulties making payments on time, then the applicant may be denied the credit or loan, or credit may be offered at a higher interest rate and/or with a lower credit limit.
In order to maintain healthy credit, you should regularly check your credit report to keep track of your accounts. This is not only a good way to keep track of your credit score, but also to make sure that there is not any fraudulent credit activity.
To keep an eye on your credit, use Mint's credit score feature to track your credit rating and get tips on how to improve your overall rating.