A question that is often asked by employees, tenants, and others whom have been asked for their permission to carry out a credit check. Here we hope to provide some clarity and dispel some misconceptions.

The basic credit check

The fundamental components of a basic check are identification of any court enforced actions against the individual or data subject. These will cover:

• County Court Judgements (CCJs) detailing the date of the judgement, the amount of the award made, and the court reference. If the CCJ has been satisfied, that is debt repaid, then this will also be recorded along with the date satisfied.
• Bankruptcy order detailing the date of the order, the amount awarded, and the court reference. Unlike CCJs a bankruptcy order will not always have an amount of award associated with it. If the court records show that the bankruptcy has been satisfied then a date will also be given for this event.
• IVAs, these are voluntary agreements for insolvency. Similar to the bankruptcy order there will again be dates and court references.

Additional areas a credit check can cover.

• Risk scores identifying the potential risk of default on financial payments.
• Corrections recorded against an individual’s credit file. For example, someone may feel that a CCJ was incorrectly recorded or that there we other related factors they wish to be recorded.
• Credit searches, normally relating to applications for credit. When someone applies for a financial loan or credit agreement such as a mobile phone account, a search is normally conducted and a record of the event is recorded on the individual’s credit file.
• A summary of financial accounts maintained by an individual at their address, this is sometimes used to confirm an individual’s identity and address history.
• CIFAS records. This is available to members of CIFAS only. The database will record instances of employee fraud and related events.
• HM Treasury and OFAC sanctions lists. These lists maintain details of individuals and sometimes organsiations convicted of fraud, or banned from investment, or suspected of involvement with terrorism (as recorded in the OFAC list).

Personal details on the individual’s credit file not revealed.
Due to data protection requirements details such as whether an individual has missed financial payments, the total amount of credit, and the specific companies providing credit, will not be revealed for the purpose of a tenant or employee credit check. Such details can only be provided in very specific circumstances.

Who should undertake a credit check?
A short answer is any landlord or employer who feels that an individual with adverse financial history will be a risk to their business or customers. There are also regulations that apply to certain areas of employment such as within the financial services sector and security sector.

How often should a credit check be undertaken?
This really depends on the business and the degree of risk mitigation required. It should be noted that a credit check can only ever provide a view for a specific point in time. Adverse financial data is normally removed from an individual’s credit file after 6 years. Additionally a CCJ or bankruptcy order may be pending and could show up against an individual a few months after a report has been provided. It is quite common for businesses to request a credit check annually but in some cases they are conducted every 3 to 4 months.

Impact of a credit check on an individual’s credit file
Every search carried out will leave a record, so whether a search is for employment screening, tenant checks, utility services, or loan application, there will be a record kept. When an individual applies for a loan the lender will normally take into account other credit applications when determining the level of risk. A credit check (as conducted by Credit Check Services) for purpose of employment screening or tenant checks will not affect the individual’s personal credit score or their ability to obtain credit.

For more information on tenant or employee credit checks visit Credit Check Services.