Ways of Checking the Credit of a Borrower

Anytime you decide to extend credit, lend money, or rent property, you should consider obtaining a credit history report for the applicant. A credit history report will give you a glimpse into the past of the applicant and his history of satisfying debts completely and on time. Extending services to an applicant, regardless of his credit history, is always a risk, but you can use a credit history report to choose a more reputable applicant or impose conditions -- such as a larger down payment or cosigner -- for a person with a problematic credit history.

First, release or obtain a release statement to authorize your credit history inquiry. Include a space for the applicant's name, current address, Social Security number and date of birth. Present the release to the applicant for his or her review and signature. You should also produce a copy for the applicant’s records.

Review the websites for the three major credit reporting agencies; Experian, TransUnion and Equifax. Find out the current prices for obtaining a report as they vary and are subject to amendment. The frequency of your inquiries will determine the cost for some of the reporting agencies with some of the agencies offering a bulk rate should your needs call for batches of reporting. 

Impose a fee for securing the credit history report at your discretion. You are not obligated to charge a fee to cover the cost of your credit inquiry. Make sure the fee, if you choose to impose one for a credit check, covers the cost of obtaining the report and any other administrative costs – again, at your discretion.

Provide a receipt for any fees collected and a copy of the signed release from the applicant. In some cases, you may waive the fee or reimburse the applicant upon retrieval of a satisfactory report. The receipt will serve as proof of payment to keep any refund or credit commensurate with what was originally charged.

Go to one or more of the credit reporting agency's websites and enter the pertinent information to identify the applicant and retrieve the report. You will need to pay the fee associated with obtaining the report and provide your contact information to receive the report. You can choose to review the credit scores alone or evaluate the specific credit history listings to evaluate the applicant.

While the formal process for evaluating a person to whom you choose to extend credit may seem arduous and unnecessary, it is a viable means for assessing the credit worthiness of the applicant and may save you the headache and expense of collections efforts later.