What is a Credit Bureau?
A credit bureau is a company or organization that
collects information from various sources to offer consumer credit information
on individual consumers. A credit bureau is an organization that provides
information on an individual’s bill paying and borrowing habits.
information gathered by a credit bureau is then distributed (for a fee) to
credit card issuers, such as financial institutions and credit card companies.
When these agencies view the information provided by the credit bureau they can
accurately gauge an individual’s credit-worthiness.
The information provided by a credit bureau
enables a credit card company or lending institution to gauge a borrower’s
ability to pay back a loan. This information can therefore affect the interest
rate and terms of the loan. The information provided by the credit bureau will
directly affect the loan obligation or offer to the consumer.
Interest rates and the terms latent in a loan
agreement are not uniform. The fluctuations are based on a risk-based pricing
model that is narrowly based on a borrower’s credit rating. A consumer with
poor credit scores (those individuals who have defaulted on loans or made
numerous late payments) or court adjudicated debt obligations, like
bankruptcies or liens, will pay higher annual interest rates than borrowers who
possess strong credit ratings.
Credit Bureaus in the United States and Data
In the United States, a credit bureau will collect
and collate personal information of a consumer, as well as financial and
alternative data from a variety of sources, known as data furnishers, with
which the credit bureau has a relationship. A data furnisher, in most instances,
is typically a creditor, lender, utility, court system (information obtained
through public records), or debt collection agency.
The data furnishers that provide information to a
credit bureau concerning a particular individual are those lenders or agencies
who have developed, in some form, a business relationship with the borrower. A
data furnisher will report the payment experience that they had with the
request to customers of the credit bureau for the purpose of assessing the
individual’s credit risk. In addition, this information can be used to assess
the individual’s credit score in alignment with their ability to obtain a lease
In the United States, the legal classification for
a credit bureau, based on the Federal Fair Credit Reporting Act, is a consumer
reporting agency. A credit bureau, in the United States, operates under Federal
law to ensure those consumer protections and the general rules or governing
guidelines concerning the exchange of personal information is adhered to.
credit bureaus in the United States must follow these regulations implemented
by the following Federal legislations: the Fair Credit Reporting Act, the Fair
and Accurate Credit Transactions Act, Regulation B, and the Fair Credit Billing
Federal Laws and a Credit Bureau
A credit bureau and their coordinating clients, in
the United States, will be governed by two Government bodies. The Federal Trade
Commission has oversight for the consumer credit bureaus, while the Office of
the Comptroller of the Currency regulates and supervises all national banks
that do business with credit bureaus.