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Credit Check

Credit Check Definition

This process whereby a review of a borrower's credit history by a lender prior to the extension of credit (often as part of the mortgage application process). Basically, a credit check helps lenders determine an applicant's creditworthiness and ability as well as willingness to repay debts. Credit checks will examine and reveal a borrower's payment history (i.e. outstanding debts, arrears, non-sufficient funds checks, late payments) and other information alerting the creditor of the level of risk that the former poses. 


Additional meaning of Credit Check:

It is a kind of check that is undertaken on the counterparties to a transaction to ensure their financial backing prior to the actual transaction. Purposely, it is to ensure that said parties have the needed resources to ascertain their respective positions in the trade. Credit checking is needed to protect the interests of the parties thereby ensuring that each has the capacity to enter into a transaction.





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