You probably already know that your credit plays a major part in applying for loans.

When lenders decide whether or not to offer you a loan, or which of their products would best suit you, they will inquire about your credit.

They don’t usually ask you, however (though you may be asked during the more casual preliminary stages, such as “do you know how good your credit is?” or something along those lines).

Instead, they’ll take some personal information and submit a request to one or more of the major credit reporting agencies (often abbreviated CRAs).

If you’re applying for a loan, you’ll probably already have all of the information on hand…but if you just happen to be checking your credit for another reason, make sure you know things like your Social Security Number and your addresses over the past two years.

The CRAs offer several different ways for the lenders (or anyone else who requests it) to view the information. The simplest is a three-digit credit score, but there are also more detailed credit reports. These can include such things as your current and past  bank, credit card, or other accounts, and especially whether they have been paid consistently, paid late, closed, or gone into collection status.

These details give the lenders a good idea about “predicting risk”, which basically just means how likely you are to pay your bills on time.

The good news is that even a shaky or downright bad credit history doesn’t automatically mean that there is no hope for getting a loan. Usually, it just means that you have a different range of choices.

One small but important thing to remember: you may have heard that every time someone checks your credit, it counts against you.

That’s true and false; if you check your credit, or a potential employer or a company that you’re already doing business with checks your credit, it won’t affect you at all. If it’s a lender, it does count against you a little bit. It doesn’t affect you very much, especially if you have a lot on your history already. And multiple inquiries in a two-week period are counted on your credit score as a single inquiry — so don’t worry about shopping around!

The only time you need to worry about credit checks affecting your score is if you have very little on your credit report (i.e., just starting out) and there are a lot of inquiries that are more than two weeks apart. And even then, they’ll likely make less of a difference than one unpaid bill!