As a lawyer for a bank, I’ve had a lot of people complain about background checks and to some extent; they felt that it was an invasion of privacy. Credit agencies are obliged and/or required to do background checks on their applicants because it’s a necessary procedure to guarantee the identity of the applicant. It also helps prevent the applicant from getting money that’s going to be difficult to pay off in the long run. For example, a credit card applicant who’s making minimum wage can be given a credit card but with a small credit limit.
When that applicant decides to increase his credit limit but he’s still with the same job, he may be subjected to a background check to ensure that he has the financial capabilities to pay for the credit limit in case he maxes out. The background check will include combing through his credit history, credit rating, and also confirming the location of his home. Background checks are not illegal and they are not an invasion of privacy. They are just standard operating procedures for financial institutions because they want to make sure that they’re giving money to the right people. When a background check does not have positive results, it will just mean the credit applicant will be denied.
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