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.

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RELATED FAQS
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    Find out if having a checking account can have a negative impact on your credit report. Generally, it doesn't, but there ... Read Answer >>
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    Transactions not at arm's length have real tax and other consequences for individuals and businesses, but they are not necessarily ... Read Answer >>
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