Who is checking your credit? More people than you realize

When Jason Craine went into a local music store to rent violins for his twin boys, he wasn’t expecting anything out of the ordinary.

What he got instead: A credit check.

“I was caught off-guard,” says Craine, a financial advisor in Wichita, Kansas. “I understood why, but I just wasn’t expecting it.”

Ultimately he decided to buy the violins outright, and his boys are now making good progress in 5^th Grade Orchestra. But Craine is not alone, in being shocked at when and where a credit record can come into play.

When it comes to car loans or mortgages or new credit cards, everyone knows your credit history is going to get pulled. But there are plenty of other occasions, too, where your payment history will get put under the microscope – and you would be wise to know what those circumstances are.

Of course, not all credit checks are created equal. Some are called ‘hard’ pulls -- if you are applying for loan, for instance – and could negatively impact your score, at least in the short term. Others are ‘soft’ inquiries – such as checking your own record, or if a company is extending a pre-approved credit card offer – and won’t drag down your numbers. 

A few examples of credit checks you might not even realize are happening:

Insurance Policies. Before you sign any contract, your insurer is going to want to know how likely you are to pay those premiums. And in most states, that likely means a credit check.

“One of the most frequent times a credit check comes into play is when applying for any type of insurance -- life, auto, disability,” says Rodney Loesch, a financial planner with LifeGoals Strategies Group in Lee’s Summit, MO. “It can make a big difference in the rates you pay, or even if you are approved at all.”

There are, however, some areas that restrict the use of credit information in putting together auto or homeowner’s policies. Those seven states are California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, and Utah.

Utility Companies. If you’re moving into a new place and need to set up the basics like gas, electricity, or water, you’re essentially asking that utility for a line of credit. That’s why they may want to check your credit history (although it’s considered a ‘soft’ pull, that won’t damage your score).

Where this often comes into play: Whether or not the utility requires a security deposit. A stellar credit record, and you may not have to put any money down initially; a poor one, and they may ask for a deposit up front before extending service.

Job Applications. Generally speaking, under the Fair Credit Reporting Act, a potential employer is within their rights to ask for your credit history, although it does require written consent. This can even happen at a company you’re already working at – for instance, if you are being considered for a promotion.

That being said, some states have additional laws that restrict or ban employment-related credit checks – among them California, Connecticut and Colorado. Some cities do as well, a primary example being New York City. 

Sometimes there are exceptions to those restrictions – such as finance-oriented jobs that involve the handling of money, where credit information becomes critical.

Rental Apartments. Landlords want to know how likely you will be to pay your rent on time, which means digging into your credit history. In general terms, a FICO score of 670 or above indicates the level of “good creditworthiness” that will appeal to property managers.If your score is in need of a boost to meet requirements, you might want to consider a secured charge card, such as Current’s Build Card. The Build Card is connected to your available spending balance and you can build your credit history as you bank with your everyday transactions.* As you spend, funds are held in reserve to pay your bill at the end of each month, which are then reported as ‘on-time’ payments to the three major credit bureaus (Equifax, Experian and TransUnion). You can also set your account to ‘auto pay’ to ensure you never miss a payment. Members on Current have increased their credit score up to 80 points within just six months of using the Build Card.**

However, in this competitive rental environment, it might not be good enough to have decent credit. The site RentCafe compiled a “Rental Competitiveness Index,” and found that “American renters experienced a highly competitive market this year” – with Miami being the most challenging location of all.

In other words, you want to have better credit than all the other applicants, since the landlord can choose whom to approve. That means, the higher score the better.

Knowing all the different scenarios that require a credit history will give you a fuller understanding of just how important it is – and more motivation to clean it up, and boost that score higher.

And if you want to know who exactly has accessed that information, you can certainly find out: Request your free report at AnnualCreditReport.com, and it will tell you about all credit inquiries.

“The difference between excellent credit and average credit can cost you tens of thousands of dollars in higher interest over a lifetime,” advises Craine. “That’s why it’s important to guard your credit carefully, and understand when it’s being checked.”

*Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.

**Based on Build Card users, as of December 2024, who opted in to Credit Score Insights and have remained active for at least six months. Scores are calculated based on the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models and may not be the same model your lender uses. Credit scores depend on various factors, including your payment history, delinquencies, credit utilization, length of credit history, types of credit, total number of accounts, inquiries, and other financial activities. Individual results may vary, and a credit score increase is not guaranteed.