Saturday, July 23, 2011

The Ins and Outs of Credit Bureaus

Credit bureaus play an important role in your financial life, acting like a warehouse, collecting information about all your financial activity such as when you take a loan out on a car or apply for a new credit card. Lenders are the suppliers of this information and not only report transactions that are favorable to your credit but ones that may be not as favorable such as late payments of bills and large debt. Public records are another source of information for credit bureaus and they use all this material to create your credit report and scores.

The material that is stored in credit bureaus falls into several categories. There is personal information such as your name, social security number, date of birth, addresses at which you have lived and a history of your employment. If you have had any activity in a court system with regard to financial judgments, such as a bankruptcy, tax lien or foreclosure, then this information is maintained by the credit bureaus. They also keep track of every inquiry someone makes about your credit report and scores but the greatest amount of information that they store is that which about your loans and credit cards. This can include details about the type of loan or credit card, the date the account was opened, the account or loan balance, the status of the account or loan, payment activity, comments and your liability on the account. Negative items which have been closed out are usually not part of your credit report and scores.

The three major credit bureaus are Equifax, TransUnion, and Experian. Any one of these companies can be used by a lender to obtain your credit report and scores. The companies simply provide the information that is contained in your credit report and scores to the lenders who then make the decision about whether or not to provide you with a loan or to let you open a new credit account. Credit bureaus play no role in making these decisions as they only provide the requested financial reports and scores and do not make any judgments about your credit rating. The final decision always remains with the lender.

Credit bureaus tend to have a bad reputation but when they are working properly, they can be very helpful when you have a financial need. The information they hold in their credit report and scores enables you to borrow money from lenders and institutions with which you may not have any history and can also help you to get a better rate on a loan, for example, if this information shows that you have paid your bills on time, borrowed responsibly and maintained a low balance on your credit cards. Credit bureaus can also help you if you find errors on your credit report and scores and are obligated to fix them within a specific period of time.

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