Grace YoungEmployment verifications and credit checks are common screening elements for employment, housing, and most significant life decisions. Although background checks reveal a criminal, financial, or any other past or present record of an individual, people are most often worried about how they will impact their credit rating.
In this post, we will explore how background checks are conducted, if a credit check is involved, and if they affect your credit rating.
What Is a Background Check?
A background check is a process whereby an employer, a landlord, or other essential opportunity provider investigates the past of a potential hire, tenant, or anyone seeking the chance. Background checks involve criminal background, employment history, education, training, and, where necessary, credit information.
The kind of detail the background check may cover may vary depending on the reason for the check and the purpose of the engagement. However, the general idea is to determine the reliability and competence of the individual in question.
Does a Background Check Include a Credit Check?
A credit check is only sometimes done, but where it is done is when one is working in financial services or has significant responsibilities. The Federal Fair Credit Reporting Act says employers and landlords who want to use your credit report as part of your background check must ask you first. Even so, credit checks are only commonly part of background check processes if they are most relevant to the function or the responsibility for which the applicant is to be hired.
What Type of Credit Inquiry Is Used in a Background Check?
If a credit check is contained in a background check, it is termed a soft credit check, soft inquiry, or a soft pull credit check. Unlike the complex inquiry type, when you apply for credit, for example, credit card loans, which are harmful to your credit score, the soft inquiry is non-negative to your credit score. Employers and landlords use soft searches to review your credit file; the check does not impact the rating.
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Will a Background Check Lower Your Credit Score?
Background checks are effective in affecting credit scores in most cases if specific necessities like the police clearance check are met. As stated earlier, if the report is used in the background check, it will be referred to as a soft check and will not impact your credit score. However, one most important point is that hard inquiries do not mean you are asking for credit or piling up debts, so they don’t affect your credit rating.
But if you apply for a loan or new credit with a background check (for instance, when renting an apartment), a hard inquiry might be made, slightly lowering one’s credit score. This is unusual because background queries do not usually present challenging questions.
How to Monitor Credit Impact from Background Checks?
Background checks do not usually impact your credit rating, but it is essential to check on it occasionally. That way, you may have to use another service like Beem that informs you of any credit inquiries made on you, changes in your credit score, and even new items added to your credit report. This will tell you whether a soft or hard check has been conducted to ensure you practice good credit practices.
Conclusion
In summary, background checks and credit checks serve different functions, and while a background check may include a credit review, it usually does not affect your credit score. Most credit checks related to background screens include soft inquiries, which do not reduce your score.
Even when undertaking background checks, it is critical to monitor your credit activities.
Consider utilizing a service like Beem to monitor your credit health at all times. Beem not only helps you monitor your credit regularly but also organizes your funds straightforwardly and efficiently.
It allows you to stay in control and preserve your financial well-being by tracking any credit inquiries or changes to your score, ensuring that no unexpected background checks catch you off guard.
People Also Ask
Does a background check show a credit score?
No, a background check does not usually reveal your actual credit score. If you give consent, it may include a credit report review.
Is a background check the same as a credit check?
A background check uses other details, including criminal records and employment status, unlike a credit check, which entails checking financial performance and creditworthiness.
Can landlords check my credit score during a background check?
Yes, landlords may conduct a credit check as part of their background checks to determine your financial responsibilities. However, they need your permission to do so.
