A credit check can cost between $20 to $30 on average. Credit bureaus such as Experian, Equifax, and Transunion provide credit reports to businesses and consumers at a cost.
The cost of a credit check can vary between credit bureaus, with Experian, Equifax, and Transunion charging different fees.
This cost is worthwhile since it grants access to essential information that can help individuals or businesses make informed financial decisions, such as winning or losing a loan application.
What Is A Credit Check And Why Is It Necessary?
Definition Of A Credit Check
A credit check refers to the process of accessing an individual’s credit report from any of the major credit bureaus in order to evaluate their creditworthiness.
It involves evaluating the individual’s credit history to determine their credit score, payment history, credit balance, and credit utilization.
The credit report also includes personal information such as name, address, and social security number.
Some of the key details to note about credit checks include:
- Credit checks can be either soft or hard. A soft credit check does not affect your credit score and is usually done when you are checking your own credit report or when a potential employer is checking your credit report. A hard credit check, on the other hand, can affect your score and is usually done when applying for credit or loans.
- Credit checks are a critical step for anyone hoping to get approved for a loan, credit card, or opportunity that requires them.
- Every citizen is given the right to one free credit report per year, as mandated by u.s. law.
The Cost Of A Credit Check: How Much Can You Expect To Pay?
Different Types Of Credit Checks
When it comes to credit checks, there are different types available, each with a unique purpose.
Understanding the various types of credit checks can help you determine which one is required for your situation.
Here are the most common types of credit checks:
Soft credit checks
These checks do not affect your credit score and are typically used for background checks and pre-approved credit offers.
Hard credit checks
These checks do impact your credit score as they show up on your credit report.
They’re usually conducted by lenders and creditors when you apply for a loan, credit card, or lease.
Tenant screening credit checks
Landlords and property managers use these kinds of checks to assess a prospective tenant’s creditworthiness.
They help landlords determine if a tenant will be able to pay their rent on time.
Employment credit checks
Employers typically use these checks as part of the employment screening process to assess a job candidate’s financial responsibility.
Average Costs Of Credit Checks
The cost of a credit check depends on the type of check being conducted. Here are some average costs associated with each credit check:
- Soft credit checks: These checks are usually free or cost around $10.
- Hard credit checks: Expect to pay around $30 to $50 per credit check. However, the cost can be higher depending on the lender and the type of loan or credit you’re applying for.
- Tenant screening credit checks: Landlords may charge applicants an application fee of around $25 to $50 to cover the cost of the credit check.
- Employment credit checks: Employers usually pay for these checks, and the cost can range from $30 to $100 per check.
Additional Fees To Consider
In addition to the credit check fees, there may be other costs to consider:
Credit monitoring
Some credit bureaus offer credit monitoring services for a monthly fee. This service can alert you to unauthorized activity on your credit report.
Credit freeze/unfreeze
If you’ve experienced identity theft or want to protect your credit, you can freeze your credit report, which prevents anyone from accessing your credit information.
You can unfreeze your report temporarily when necessary, but there may be a fee associated with each freeze or unfreeze.
Credit report copies
You can access your credit report for free once a year from each of the three main credit bureaus. However, if you need additional copies, there may be a fee associated with accessing your credit report.
What Is Included In A Credit Check?
Types Of Information Included In A Credit Report
A credit report is a comprehensive overview of your credit history.
Although the exact content of a credit report may vary depending on the credit bureau producing it, most credit reports include the following types of information:
- Personal information: Your name, address, social security number, and employment history.
- Credit accounts: A list of all the credit accounts associated with your social security number, including credit cards, loans, and mortgages.
- Payment history: Your payment history for each credit account, including late payments, missed payments, and bankruptcies.
- Credit inquiries: A list of any creditors who have requested your credit report in the last two years.
- Collections: A list of any accounts that have gone to collections due to nonpayment.
How Credit Reports Are Scored
Credit bureaus use a variety of scoring models to analyze credit reports and produce credit scores.
The most common scoring model is the Fico score, which ranges from 300 to 850. Your credit score is influenced by many factors, including:
- Payment history: Your history of making on-time payments.
- Credit utilization: The amount of credit you are currently using compared to your total available credit.
- Length of credit history: The amount of time you have had credit accounts open.
- Types of credit: The mix of credit accounts you have, including credit cards, student loans, and mortgages.
- New credit: How frequently you have recently opened new credit accounts?
Reasons For Conducting A Credit Check
There are various reasons why people conduct a credit check.
Credit checks provide critical information on a person’s credit history and financial behaviour, helping businesses assess if a candidate is trustworthy and reliable.
Here are some common reasons for a credit check:
Landlord Credit Checks
A landlord’s primary goal is to prevent rent defaulters and irresponsible tenants from occupying their properties.
Besides, landlords want to ensure that they are dealing with trustworthy tenants who can pay their rent on time throughout the lease term.
Here is why landlords conduct credit checks:
- To verify a tenant’s financial history before handing over the keys.
- To evaluate whether a tenant is responsible for his/her finances.
- To determine whether a tenant is a high risk or not.
Employment Credit Checks
Employers can conduct credit checks on potential job candidates, especially those who will be handling a company’s finances.
The credit checks assess a candidate’s financial behaviour and can help the employer gain insight into a candidate’s personal life.
Here are reasons why employers conduct credit checks:
- To identify potential job candidates who are responsible for their finances.
- To evaluate whether a candidate can handle the finances of the company.
- To determine whether a candidate is a high risk for company theft or embezzlement.
Credit Checks For Loans
Lenders use credit checks to measure the likelihood of a borrower repaying a loan. Past financial behaviour is critical to a lender when determining whether to grant a loan or not.
Here are the key reasons why lenders conduct credit checks:
- To determine whether a borrower is creditworthy and reliable.
- To assess a borrower’s past financial performance.
- To evaluate whether a borrower can pay back the loan.
Insurance Credit Checks
When evaluating an insurance application, insurance providers review the credit history of applicants to determine the level of risk they pose.
Credit checks are a valuable tool for insurers, especially for evaluating auto insurance risks. Here’s why insurance providers conduct credit checks:
- To evaluate an applicant’s risk level of filing damage claims frequently.
- To determine the likelihood of an applicant paying their premiums on time.
- To assess the likelihood of an applicant defrauding an insurance company.
Monitoring Your Credit Report: How To Get Your Report For Free
Do you ever worry about what could be on your credit report? With identity theft, fraud, and reporting errors, it’s essential to keep a close eye on your credit.
However, obtaining your credit report can be costly, especially if you need to do it often. Fortunately, several methods allow you to monitor your credit report for free.
Annual Credit Report
The annual credit report website, authorized by the government, is you can obtain your credit report once a year from each of the three credit bureaus—Equifax, Experian, and Transunion—for free.
This service allows you to keep tabs on your credit health by reviewing your payment history, balances, and open accounts.
Here are some essential things to consider regarding the reports:
- Make sure you visit the official website annualcreditreport.com, as other websites may lure you into paying for services you could get elsewhere for free.
- You can request the three reports at once or stagger your requests throughout the year to regularly monitor changes.
- Although you’ll see your reports, you won’t find out your credit score.
Other Ways To Obtain Free Credit Reports
Beyond the annual credit report, you also have other options for securing free credit reports. Keep in mind that these options will not provide you with your credit score.
Credit Karma
This site offers free access to your credit reports and scores, along with credit monitoring and personalized recommendations to improve your credit.
Credit Sesame
This service provides you with a free credit report and score every month, including credit monitoring and identity theft protection.
Discover credit scorecard
Through this service, anyone, including non-discover customers, can access their Fico credit score for free.
You’ll also get information on your credit utilization, payment history, and credit age.
Credit Freeze: A Cost-Effective Way To Secure Your Credit Information
Definition Of A Credit Freeze
A credit freeze or security freeze puts a pause on access to your credit reports. It’s like a barrier to stop identity thieves from opening new credit accounts in your name.
A credit freeze doesn’t prevent those with whom you already have a financial relationship from gaining access to your credit report.
Pros And Cons Of A Credit Freeze
A credit freeze is a cost-effective way to protect your credit information. Consider the following pros and cons before making your decision:
Pros
- Stops unauthorized access to your credit information.
- Prevents identity thieves from opening new accounts in your name.
- A credit freeze is a cost-effective way to secure your credit information.
Cons
- It does not prevent thieves from using existing accounts.
- You need to unfreeze your credit report before applying for a new account.
- It may not be suitable for everyone.
How To Initiate A Credit Freeze
Initiating a credit freeze is a straightforward process that can be done in a few steps. Here’s how to start your credit freeze:
- Contact the credit bureaus – contact Equifax, TransUnion, and Experian to request a credit freeze.
- Verify your identity – you will need to verify your identity by providing your personal information such as your full name, social security number, and a valid email address.
- Request a credit freeze – once your identity is confirmed, request a credit freeze.
Frequently Asked Questions On How Much Does A Credit Check Costs
What Is A Credit Check?
A credit check is an assessment of your credit score and credit history.
Why Do Landlords Perform Credit Checks?
Landlords perform credit checks to assess your financial reliability as a tenant.
How Much Does A Credit Check Cost?
The cost of a credit check usually ranges from $15 to $50 per applicant.
Can A Credit Check Impact My Credit Score?
Yes, a credit check may have a minor impact on your credit score.
Conclusion
Understanding your credit status shouldn’t break the bank. In most cases, checking your credit score is free. However, specialized services might come with fees.
You’re investing in your financial health, not just spending money. The cost is minimal compared to the peace of mind and financial clarity you gain.