Credit checks are done to determine the credit score of an individual. A credit score is an indication of a persons financial creditworthiness. It is used to verify whether the person qualifies for a loan, or any other credit, based on whether he has repaid his past loans satisfactorily. A credit score is used by banks and other lending companies for estimating how risky the borrower is. In other words, a credit report is a reflection of the past credit history of an individual.

In the U.S., the credit score is based on the FICO (Fair Isaac Corporation) score that is calculated by using some mathematical and statistical techniques. There are also other versions of calculating credit scores such as Beacon and Empirica. A FICO score is based on various factors including punctuality of payment in the past, capacity used (ratio of current revolving debt to total available revolving credit), length of credit history, types of credits used, and recent credits obtained. FICO scores range from 300-850, wherein a score below 600 is considered bad while a score above 720 is considered good. Every U.S. citizen can obtain a credit report from a reporting agency as per the FACT Act (Fair and Accurate Credit Transactions Act).

Credit checks are very useful. Some applications of a credit check are to find out about prospective tenants for renting out properties or to learn about potential employees before offering employment. Credit checks are mostly done by creditors before giving loans.

There are many credit-rating agencies that do credit checks. These do credit checking for individuals as well as corporations. The fee for a credit check ranges from $20 to $1,000, depending on the information required. The three most famous credit-rating agencies in the U.S. are Equifax, Experian, and TransUnion.

There are also independent credit-rating agencies. Information about these can be obtained from the Internet. Many organizations also provide free credit-check facilities when you sign up for any other service with them.