Credit Bureaus

Credit Bureaus or Credit Reporting Agencies maintain files on millioons of borrowers. Lenders making credit decisions buy credit reports on their prospects, application and customers from the credit reporting agencies.

Credit bureaus maintain and update this information in their computer database and sell it to lenders and other credit grantors in the form of credit reports. Although credit bureaus provide your credit report to lenders when you apply for credit, they do not make actual lending decisions. It is up to the lender to evaluate your credit report and any other factors they consider important and then decide whether or not to offer you credit. Credit bureaus charge the credit grantor a fee for every credit report they sell.

They collect information about consumers' payment habits from various sources including banks, savings and loans, credit card companies, and other financial institutions. These sources are called Automatic Subscribers, who report information on any individual who does business with them. In return, they receive credit reports of potential applicants at discount rates.

Some creditors do not automatically report to credit bureaus. Companies such as insurance agencies, rental agents, utility companies, and medical facilities, report only when payments are severely overdue, collection agencies are hired, or legal actions are taken.

Credit bureaus also obtain information from public records such as bankruptcies, foreclosures, tax liens, and court judgments..

Three Major Credit Bureaus

There are many credit bureaus in the United States but only a few main ones. The big three credit bureaus provide nationwide coverage of consumer credit information: Equifax, Experian, and Trans Union.

However, your credit report from one credit bureau is not necessarily exactly the same as your credit report from another because not every credit grantor reports to all three credit bureaus.