Credit report agencies are for-profit businesses that compile, maintain and sell credit information. A credit bureau is an independent entity that collects payment history reported to them by lenders and creditors (credit card companies, auto loan companies, mortgage lenders, debt collection agencies and utilities). Credit reports also include public records such as bankruptcies, civil lawsuits, foreclosures and tax liens. The information is then gathered and organized by a number of criteria to create a credit score for each consumer. A credit bureau can then sell this information to creditors, insurance companies and employers who need to make decisions about you.
There are four national traditional credit reporting agencies in the United States. These are Experian (formerly TRW Information Systems & Services and the CCN Group), Equifax, TransUnion and Innovis. They are not affiliated with the government and do not regulate themselves. However, they do work together in a trade organization called the Consumer Data Industry Association (CDIA) to establish industry-wide reporting standards for their products and services.
The term CRA is used to refer to the three big nationwide credit reporting agencies. In addition, there are several other consumer reporting companies that focus on certain industries. For example, some specialty CRAs provide verification of employment, salary and education as well as professional licenses to employers and others who need to verify the information they receive from the CRA. Other specialty CRAs may gather and report payment information associated with telecommunications, pay TV and utility services. Some even specialize in low-income or subprime reporting for consumers who have impaired credit histories.
Credit reporting agencies are regulated by the Fair Credit Reporting Act and two federal regulatory bodies. The Federal Trade Commission has oversight over consumer reporting agencies and those who supply their information, while the Office of the Comptroller of the Currency charters and regulates national banks with regard to their responsibilities to furnish data to consumer reporting agencies.
Understanding how a credit agency operates can help you make informed decisions about how you handle your personal and financial life. It’s important to remember that credit report agencies do not decide whether or not a lender will approve you for a loan or what terms you might get on a credit card. The only thing a credit agency determines is your overall creditworthiness by reviewing and rating your information in a credit report.
Lenders and creditors use your credit report to determine how likely you are to repay a loan and the interest rate you might receive. Credit agencies only collect and house the information; they do not approve or deny loans. Rather, the agencies provide a compiled report to lenders that contain your credit history and an estimate of your reliability. The credit agencies then use this information to assess your ability to repay a loan or make payments on a utility bill. Credit agencies can also supply your credit report to other third parties with your permission, such as an employer or landlord. credit report agency