What is a Credit Bureau?
This article is designed to explain exactly what a Credit Bureau is and what it does.
Credit Bureaus Explained
If you’ve ever applied for any type of credit, whether it’s a bank loan, car loan or even a new TV or washing machine, you’ll have used a credit bureau. Or rather, the company you apply to for the loan has used a credit bureau on your behalf, and the decision as to whether you receive that loan or not rests with them. So what is a credit bureau, and how does it affect you?
A credit bureau, at its simplest, is the equivalent of an information desk for banks, retailers and other similar financial companies. Credit bureaus hold all your current information when it comes to what you’re like financially. Whether you only owe $100 to your bookmaker, or $10,000 to your credit card company, if you’ve taken that amount out on credit, a credit bureau will have all the facts.
There are three main credit bureaus that everyone uses – some companies use all three, others just use one or two. These three companies are Experian, Equifax and TransUnion. Without approval from either one of these credit bureaus, you’ll find it extremely difficult to open up any kind of credit account. That includes mortgages, car loans and other financial outlays where you can’t afford to pay cash outright.
How A Credit Bureau Works
Although there are three credit bureaus, and companies can and often do use all three at the same time, they work independently from each other. This ensures that every single thing about your financial history is on record. They do this in a variety of ways, although the most common is via your bank, and how you run your account.
However, other things that the credit bureaus take into consideration are your name, date of birth, social security number, your employment details (both past and present) and your address (again, both past and present). This is then collated into one overall file on you, which lenders can then get access to from the credit bureaus whenever you apply for credit.
Depending on your credit score, you will either be approved or denied for credit. Your credit score is determined by how you’ve conducted yourself in the past when it comes to paying for goods you’ve bought, or how your credit card or store card stacks up. For instance, if you have a high amount of debt but you’ve always paid it in time, you could still receive a good credit rating.
The same goes for if you only have a few hundred dollars in debt, but you’ve missed numerous payments – that would result in an adverse credit rating, and probably stop you from getting any more credit. The better your payment history, the higher a credit rating you’ll get, and it’s the high credit scores that are usually approved.
The Three Credit Bureaus
As mentioned earlier, the three main credit bureaus are separate from each other, although they offer a similar service:
- Equifax is based in Atlanta, US, and is generally the best known of the three. They offer a credit report for $10.00, and they are generally more tailored toward consumer credit.
- Experian works from both the UK and the US and is more geared towards businesses and consumers. They use the Plus Score method, which uses numerous factors to calculate your credit score.
- TransUnion is a far more in-depth credit bureau, and offer a monthly package of $9.95 per month, which also includes up to $25,000 worth of identity theft insurance.
Site Links Related Pages to Credit Bureaus
Experian Credit Reports - Equifax Credit Reports - TransUnion Credit Reports