Consumer Reporting Agency
An organization commonly referred to as a credit bureau that prepares credit reports which are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository and from other sources.
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When applying for a loan, the lender checks your credit rating to determine if you are a good candidate for a loan. A consumer reporting agency provides this information to the lender.
Consumer reporting agencies are also known as credit bureaus. There are three national credit bureaus – Equifax, Experian, and TransUnion. They provide credit scores on individuals based on their credit history.
Credit scores come from a variety of data. The consumer reporting agency looks at a person’s credit applications, public records, and any reports submitted by lenders. Looking at the borrower’s amount of credit and diligence in repaying it, the consumer reporting agency 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.
Consumer reporting agencies 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 consumer reporting agencies. 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 consumer reporting agencies 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.