Credit Bureaus: A Basic Outline
If credit is “David”, then you must be prepared to face the challenges of not one, but three “Goliaths”. Fortunately here the Goliaths are your friends who want to test your capacity of paying back credit. If you receive satisfactory results, both David and Goliath win. There is a lot of mystery surrounding the work of the credit bureaus. This article will serve you with a basic outline.
What are credit bureaus – There are three national credit bureaus in form of Equifax, Experian, and Trans Union. They are often referred to as the Big Three. They collect and store credit information on approximately 200 million consumers. They do not use this information for their own purpose but supply them to credit grantors on a fixed basis. Credit bureaus are also known as Credit reporting agencies. They do not make lending decisions but it is their job to provide the information to the creditors.
Functions of credit bureaus – Credit bureaus collect information about consumers’ financial dealings and serve that information to those who ask for it such as credit grantors, employers and insurance companies. The credit bureaus charge annual fees as well as a fee for each credit report requested. Most national and international creditors, such as banks and department stores, are registered with all three bureaus. The information is collected from sources like these and is updated. The credit bureaus also collect and retain public record information, as well as information from any small manual contributor.
Major sources of information and types of information collected are as follows:
- Consumers – When you fill out application forms for credit
- Major credit grantors and collection agencies – They send their files to the Big Three regularly. This file contains the account number, amount of balance that you owe them and a nine point scale about punctuality of payment.
- Public records – They provide information on matters like bankruptcies, legal judgments, foreclosures and registered agreements.
Based on the information collected by the credit bureaus, creditors try to measure your creditworthiness. If your credit report indicates that you have maintained your credit well, your chance of having more credit is high. On the other hand, if your report reflects a poor credit history, then you may be denied credit or pay back terms may pinch your pocket a bit more. So information especially pertaining to financial dealings is very vital in the credit report.
Free copies – Under FACT Act, you can ask for a free credit report from each of the nationwide credit bureaus that is Equifax, Experian, and TransUnion. They are required to give you a free copy of your credit report when you request for one, once every 12 months.
You can demand for a free copy of your credit report
- Within 30 days after you were denied credit
- If you are unemployed
- If you are planning to apply for jobs in the next 60 days
- If you are being paid by public welfare assistance
- If you think that your credit file has some errors resulting from fraud
How to contact the Credit Bureaus – You can contact credit bureaus at their respective websites. They can provide you with quick and easy steps to know your credit score and receive your credit report.
Equifax – www.equifax.com
Experian – www.experian.com
TransUnion – www.transunion.com
3 Common myths about Credit Bureaus – There are some information circulated by persons who do not fully understand the credit bureaus or the credit reports. This often leads to rumors.
- Credit bureaus tell creditors whom to lend and whom not to – The truth is credit bureaus collect and send the information. They are not involved in the decision making process in any capacity.
- Anybody can access your credit report from the credit bureaus – The Fair Credit Reporting Act (FCRA) orders that credit information is accessible to others only for certain allowable uses. In fact, you can easily know who has received a copy of your report or inquired about it.
- Once the credit bureau collects some information that is final – You are at liberty to place an explanation on the credit bureau report. In fact you can tell your side of the story on any dispute item or information.
So you see credit bureaus are not that bad after all. They help you to get credit reports which can get you credit, when you need it most.