What is a credit check and when should a service business run one?

A credit check pulls a summary of a customer's credit history from one or more credit bureaus — Experian, Equifax, TransUnion for consumers, or Dun & Bradstreet, Experian Commercial for businesses. The output ranges from a simple credit score to a full report with payment history, public records, and outstanding obligations. Service businesses use credit checks to decide whether to extend payment terms, require a deposit, or work cash-only with a new customer.

For B2C service work — residential plumbing, dental, personal training — credit checks are unusual unless the engagement is large or financed. For B2B work above a meaningful threshold (typically $5,000-$10,000 to a new customer), a basic credit check takes 10-15 minutes and catches the obvious risk cases. The signal is rarely 'do not work with this customer' — more often it is 'require a 50% deposit instead of Net 30 terms.'

Legal considerations matter. Pulling a consumer credit report under FCRA requires a 'permissible purpose' — extending credit, evaluating for employment, or collecting a debt are all valid. Pulling a credit report on a B2B customer (commercial credit) is less restricted but still requires the customer's consent in many situations. Most modern accounting and AR tools have built-in credit-check workflows that handle the consent and FCRA-compliance pieces automatically.