In the United States, there are three major credit bureaus, TransUnion, Equifax and Experian. Also called consumer credit reporting agencies, the three gather information on major credit use for every individual. Their role is essential in helping lenders make informed decisions about borrowers and helping borrowers get the credit they deserve.
Gather Credit Information
Lenders report information on each of their customers to credit bureaus. The information includes the name, Social Security number and address of the account holder, along with details about the account. This includes the type of account, its opening date and the amount the customer borrowed or is eligible to borrow. Lenders update these files regularly to report the amount currently owed and report late payments. The credit bureaus work with lenders to gather all of this information.
Store Credit Files
Every individual who has ever used credit in the United States, whether it is through a credit card, student loan, mortgage or auto loan, has a credit file. The credit bureaus have databases full of information on credit accounts and they use this information to generate a credit report for each individual. The report not only contains information on account history, but also public records and a list of companies that have recently obtained the person's credit report.
Provide Credit Scores
Credit bureaus earn money by providing credit reports and credit scores to lenders and individual consumers. When an individual applies for credit, the lender pays the credit bureau to obtain the person's credit report and credit score. Based on the credit report, the credit score estimates the risk of lending to the individual. People with high credit scores have managed debt well and are low risks. People with low credit scores have had problems with debt and present a high risk. Lenders use the credit report to determine whether to lend to the individual and what interest rate they should charge.
Investigate Disputes
If someone believes his credit report is inaccurate, he can file a dispute with the credit bureau that provided the report. The credit bureau must investigate the dispute and correct the credit report if it's wrong. For example, someone might notice that one of his credit card accounts does not appear on his credit report. This could be hurting his credit score because he has had a consistent history of on-time payments. If he files a dispute, the credit bureau has to contact the credit card company, obtain information on the missing account and add it to the individual's credit report.
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