Credit Bureaus Who They Are and What They Do?

More than a century ago, merchants began offering credit to their customers. As time went on, it became clear that merchants needed a method for evaluating the credit worthiness of their customers in order to minimize their risks. Small retailers worked together and traded information about their customers’ financial habits – this was the beginning of the modern credit bureaus.

Eventually, these small groups of retailers grew into credit bureaus and those bureaus joined together around the country. The bureaus were known as credit reporting agencies or CRAs.

In the 1960’s, CRAs could share financial information about consumers with lenders and creditors but not with the consumers themselves. The agencies could also report on consumers’ lifestyles, including their drinking habits, how they were perceived by their neighbors, and so on.

The Fair Credit Reporting Act (FCRA) was passed in 1971 to give consumers a way to protect themselves from inaccurate information in their reports. The law also limited access to consumers’ reports, to people or companies that had a legitimate need to see them. It also allowed consumers access to their reports and the right to dispute information in them. In addition, it set limits for how long negative information could remain on the report.

Credit Reporting Process

There are small CRAs located throughout the country. Each of the small CRAs collect credit information for a specific area of the country. They report their information directly to one or more of the major Credit Reporting Bureaus, where the information is stored. Lenders then pull credit reports from one or all of the three bureaus as needed. The three major Credit Reporting Bureaus in the United States are: Experian, Equifax, and TransUnion.

Although some lenders do not report loan details or payment history to credit bureaus, most do. Some lenders only report to the credit bureau in their local region, and some report to all three of the major bureaus. Because credit information is not reported equally to all bureaus, information in each bureau will be different.

These differences in the information credit bureaus receive explain why there are differences in credit scores reported by each bureau. Experian’s records may show you with a 750 score while Equifax’s records may show a 720 score

Any lender that reports to one or more bureaus does so on a regular basis. Most lenders update credit information every 30 days, while some may report every other month or even quarterly.

When a credit report is drawn, it is a picture of the consumers’ credit history up to the present moment. Since new information is reported regularly, it can alter the credit picture a little or dramatically, depending on the most recent activity. Consequently, because of the fluctuations in a persons credit score, lenders pull credit reports each time a person applies for credit.

For some shocking insights into the inner workings of credit bureaus, and how you can protect yourself and your credit scores from inaccurate information in your files, read this carefully.