What you need to know about credit bureaus
A credit reporting firm gathers and researches personal credit information and sells to lenders so that they can decide whether you are eligible for their products. There is vital information to help you understand what is a credit bureau.
What Is a Credit Bureau?
Credit bureaus are companies mandated to collect and store different types of data about you and your financial accounts and history. The companies sell the info to lending institutions as credit history.
Though there are many credit bureaus, clients are familiar with the major three credit bureaus which are TransUnion, Experian, and Equifax. They use this information to credit your credit history and rating.
What Does a Credit Bureau Do?
A credit bureau uses the details collected about you to create a credit history. The bureau uses the info in your report to compute a credit score for you.
The credit history will be used by lenders, like the company that provides credit cards, when they are determining whether they will give you a line of credit. As a client, you can ask for a credit history from the bureaus for free once every year.
How Do Credit Bureaus Get Your Information?
In most cases, credit bureaus rely on financial institutions and other businesses to give them client data. Most of the companies you transact with sending frequent updates regarding your active accounts. Credit bureaus can also get your details from public court records.
The information that the credit bureaus gather comes from various sources:
Information offered lenders: lenders such as financial institutions and credit card providers may give client’s account info to credit bureaus.
Data That is Gathered or Purchased by the Bureaus
In some cases, credit bureaus will opt to buy data. For instance, a consumer credit bureau can buy public records data from another credit bureau and use the info to create a credit report.
Data Shared Among the Bureaus
Even though they are competitors, sometimes the companies are forced to share info. For instance, when a consumer places a preliminary fraud alert with one of the firms, you are required to forward the warnings to the other two.
Types of Data the Credit Bureaus Collect
These companies store a wide variety of information related to you and your credit history, from the time you signed up for the first credit account. For example, a credit bureau will gather data concerning credit accounts, your loan repayment history, the amount of credit available and the amount of credit usable.
The data collected by these companies will also include outstanding debt collection, data on public records such as tax liens, bankruptcy, repossession, and forecloses.
Furthermore, credit bureaus will keep non-credit data about you comprising your existing and previous addresses, current and prior workers, data of birth and your salary info. Even though this data will not be used to compute your credit rating, companies might use it when verifying your identity.
Why Credit Reports and Scores Vary Depending on the Bureau?
Once you try to evaluate your credit history, you might realize that they are not the same. This is because lenders are not mandated to give the data to the credit bureaus. Therefore, some creditors will opt to report your account to one or two of the companies, or avoid giving the information.
Your credit rating could significantly vary based on the report that was used to calculate the score. This might be caused by the potential differences in the information used to generate the report.
Who Uses Credit Bureau Data?
Financial institutions and credit providers are the common users of the data generated by credit companies. A host of other businesses will go to credit bureaus to make inquiries about your history. Employers, insurance firms, debt collectors and landlords will talk to the credit bureaus to get the credit history.
Credit bureaus offer prescreening links to financial institutions and insurance firms to assist those firms to determine which client is eligible to use their services and products.
For instance, credit providing firms might ask for a list of clients with high credit card balances to send these clients offers for the balance to give their clients offers for balance credit cards.
Law Governing Credit Bureaus
All the credit bureaus are governed by the Fair Credit Reporting Act (FCRA). The law gives clients the right to demand an accurate credit history. If you come across inaccuracies in your credit history, feel free to dispute these mistakes with the credit bureaus. The bureau will then investigate to correct the faults when necessary.
How to Dispute Erroneous Data on Your Credit History
Client credit bureaus are required to provide you with a copy of the report. You will receive a free credit report once every year and other extra reports for a little fee.
Note that you have the right to dispute any false data in your reports and with data furnishers. The FCRA states that the client reporting firm and the firm that furnished the data to the credit bureau must do a free investigation to verify the data and correct the errors.
Credit Bureaus Providing Free Credit Reports
Note that it is your right to request for your credit history from the leading three credit bureaus. The law gives you a right to get a free report every year from the three leading credit bureaus and also consumer reporting origination. You can request your yearly credit history from the leading credit bureau via AnnualCreditReport.com
Apart from the free annual report, the credit bureaus will also offer a free credit history in various circumstances such as:
- Someone stole your identity
- You are on welfare
- You are not employed but have a plan to start work in two months
- Your application was declined because of the data on your report
Credit Bureaus Only Provide Information
The work of credit reporting companies is to offer credit data that lenders need to decline or accept your applications. Therefore, the bureau will not make a credit decision. If you think that a decision was wrongly made, you can use as the lender to evaluate your report to ensure there are no mistakes that hinder you from getting approved.
Credit reporting firms use a wide variety of sources to generate your credit reports and compute your credit ratings. For this reason, your credit report will have different data. Hence, it is essential for you to know what a credit bureau is.