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Credit Reporting Company

Company that collects information received from more than one credit repository, merges all the information, and reports it in one form; merged credit reports.

When applying for a loan, the lender checks your credit rating to determine if you are a good candidate for a loan.  A credit reporting company provides this information to the lender.

Credit reporting companies are also known as credit bureaus.  There are three national credit bureaus – Equifax, Experian, and TransUnion.  They provide credit scores on individuals based on the credit history.

Credit scores come from a variety of data.  The credit reporting company looks at a person’s credit applications, the public records, and any reports submitted by lenders.  Looking at the borrower’s amount of credit and diligence in repaying it, the credit reporting company generates a credit score based on this credit history. The credit history includes a variety of financial information about a person.  For example, it shows all of the open and closed accounts as well as the start dates for those accounts.  It also shows credit limits, loan amounts, and outstanding balances.  The credit history keeps record of the payments and payment patterns and reflects any co-borrowers or co-signers on any of the loans.  Finally, a credit history keeps track of any inquiries into credit scores.

Credit reporting companies do not determine whether or not a person can get a loan.  The credit bureaus merely provide the credit score, which the lender then uses to decide whether or not the person is a good loan risk.  The lenders have to buy these credit reports from the credit reporting companies.  Using the credit report as well as other factors such as income, assets, job history, etc., the lender gets a complete financial picture of the potential borrower and can make a decision whether or not that person can qualify for the loan.

Also, federal law requires credit reporting companies to provide individuals with a free copy of their credit report once every twelve months.  It is wise to know what is in your credit report so there are no surprises when you apply for financing.  Mistakes can happen and by checking your credit report once a year, you can make sure any mistakes get corrected.