Credit Checking

DEFINITION of 'Credit Checking'

A check performed on the financial backing of the counterparties in a forex transaction. This credit check ensures that both parties have the means necessary to cover their leveraged positions in the trade and is done before the transaction takes place.

BREAKING DOWN 'Credit Checking'

Without the process of credit checking, one party in a forex transaction would have no assurances as to the creditworthiness of the other party involved. By engaging in credit checking before transactions take place, confidence is maintained that each party has enough credit to carry out and honor the transaction.

RELATED TERMS
  1. Credit Netting

    A system whereby the number of credit checks on financial transactions ...
  2. Counterparty

    The other party that participates in a financial transaction. ...
  3. Third-Party Transaction

    A third-party transaction is a business deal involving a buyer, ...
  4. Failure To Deliver

    An outcome in a transaction where one of the counterparties in ...
  5. Transaction Identifier

    A unique identifier assigned by a business to each transaction ...
  6. Authorization Date

    The month, day and year when a credit card transaction is approved ...
Related Articles
  1. Economics

    Who is a Counterparty?

    The counterparty is the other party in a financial transaction.
  2. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  3. Economics

    Top 5 Forex Risks Traders Should Consider

    With a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
  4. Savings

    Banking: Check-Writing 101

    By Amy FontinelleThe ability to write checks from your checking account allows you to pay bills or send money to relatives more securely than using cash and less expensively than using a cashier's ...
  5. Savings

    Top 5 Reasons Banks Won't Cash Your Check

    Learn the top reasons that a bank won't cash your check, and find out what steps you can take to prevent those scenarios from happening.
  6. Investing

    Arm's Length Transaction

    An arm’s length transaction describes business deals in which the buyer and seller act independently and with no interest in the other’s benefit.
  7. Credit & Loans

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  8. Options & Futures

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  9. Professionals

    Exempt Transactions

    FINRA/NASAA Seriex 66 - Exempt Transactions. This section lists transactions which are exempt according to the USA.
  10. Professionals

    Fundamental Differences Between Futures and Forwards

    CFA Level 1 - Fundamental Differences Between Futures and Forwards. Learn the fundamental differences between futures and forward contracts. Contrasts how and where they trade and discusses marking ...
RELATED FAQS
  1. How are arm's-length transactions determined by law?

    Determine if transactions are conducted at arm's length by checking if the parties to a contract are independent and transact ... Read Answer >>
  2. Are arm's length transactions always better than transactions not at arm's length?

    Transactions not at arm's length have real tax and other consequences for individuals and businesses, but they are not necessarily ... Read Answer >>
  3. Are any arm's-length transactions disadvantageous to both parties?

    Find out why arm's-length transactions are disadvantageous when the interests of the two parties coincide and they wish to ... Read Answer >>
  4. What's the difference between a bank guarantee and a letter of credit?

    A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure ... Read Answer >>
  5. How does your checking account affect your credit score?

    Learn how your checking account is related to your credit score, as well as what types of banking activities do and do not ... Read Answer >>
  6. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center