What is a 'Credit Bureau'

A credit bureau is an agency that collects and researches individual credit information and sells it for a fee to creditors so they can make a decision on granting loans.

BREAKING DOWN 'Credit Bureau'

Credit bureaus partner with all types of lending institutions and credit issuers to help them make loan decisions. The three main credit bureaus in the United States are Equifax, Experian and TransUnion, though there are many smaller companies that provide similar services.

The primary purpose of credit bureaus is to ensure that creditors have the information they need to make lending decisions. Typical clients for a credit bureau include banks, mortgage lenders, credit card companies and other financing companies. Credit bureaus are not responsible for deciding whether or not an individual should have credit extended to them; they merely collect and synthesize information about an individual's credit score and give that information to lending institutions. Consumers can also be customers of credit bureaus, and they receive the same service – information about their own credit history.

Credit Scores

Credit bureaus acquire their information from data providers, which can be creditors, debtors, debt collection agencies, vendors or offices with public records (court records, for example, are publicly available). Most often this information is disseminated from the three largest credit bureaus, Equifax, Experian and TransUnion. Most credit bureaus focus on credit accounts however some also access more comprehensive information including payment history on cell phone bills, utility bills and more. Credit bureaus maintain all of this information in a comprehensive credit report.

Credit bureaus use a range of methodologies to calculate a credit score for individuals based on their credit history. FICO scores are the most common in the U.S. With over 25 different versions of FICO scores, credit bureaus have a range of methodologies for calculating a borrower’s credit score. Credit bureaus usually provide the range of credit scoring methods they calculate for a credit issuer allowing them to choose the type of credit score that best fits their inquiry.

Credit scores and credit reports from credit bureaus provide credit issuers with information that helps them determine credit approval and appropriate interest rates for borrowers. An individual with a higher credit score will likely have a lower interest rate on their loan.

Credit Bureau Regulation

In the United States, credit bureaus are also called consumer reporting agencies (CRAs). While credit bureaus don't actually make lending decisions, they are very powerful institutions in finance and the information contained in their individual reports can have a substantial impact on an individual's financial future. The Fair Credit Reporting Act, passed in 1970, regulates credit bureaus and their use and interpretation of consumer data, and is primarily designed to protect consumers from deliberate or negligent information in their credit score reports.

RELATED TERMS
  1. Credit Report

    A credit report is a detailed report of an individual's credit ...
  2. Credit Score

    A credit score is a number ranging from 300-850 that depicts ...
  3. Credit Reporting Agency

    A credit reporting agency is a business that maintains historical ...
  4. Bad Credit

    A qualification of an individual's credit history that indicates ...
  5. Good Credit

    Good credit is a classification for an individual's credit history, ...
  6. Judgmental Credit Analysis

    Judgmental credit analysis is a method of approving or denying ...
Related Articles
  1. Personal Finance

    6 Ways To Build Credit Without A Credit Card

    It's definitely possible – if a bit more complicated – to build a credit history without traditional credit cards. Just follow these steps.
  2. Small Business

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  3. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  4. Personal Finance

    Credit score ranges: What do they mean?

    Understand what credit scores in each range mean for your future. Learn how to improve your credit score and how it affects your ability to borrow money.
  5. Personal Finance

    Credit Repair: How to Improve Your Credit Score

    There is no quick fix for a bad credit score, but there are several strategies you can take to improve your credit rating and save money over the long term.
  6. Personal Finance

    Debunking Credit Myths and Improving Your Score

    The best way to improve your credit score is to ignore the many credit myths that exist and use these tips.
  7. Personal Finance

    Why The Credit Score You Buy Differs From The Lender Score

    It takes many people by surprise when they purchase credit scores and find the lender's credit score disclosure does not match.
  8. Personal Finance

    Why Too Many Credit Cards Can Hurt Your Credit Score

    Find out why having too many credit card accounts can adversely impact your credit score if the cards are not managed properly.
  9. Personal Finance

    Extreme Credit Repair: Why It Doesn't Work

    Most of these are illegal scams at worst and a waste of time at best. Here are five extreme credit repair techniques we do not recommend.
  10. Managing Wealth

    Websites That Give Your True Credit Score for Free

    A few websites do provide your true credit score – or something very close to it. Here's where to find them.
RELATED FAQS
  1. What's the difference between a credit rating agency and a credit bureau?

    Learn how to differentiate between credit rating agencies and credit bureaus, two industries that distribute valuable risk ... Read Answer >>
  2. Can I improve credit score with utility bill?

    In most states, utility providers aren't obligated to regularly report payment histories to the major credit bureaus. Read Answer >>
  3. What affects your credit score

    Learn how your checking account relates to your credit score, as well as what types of banking activities do and do not get ... Read Answer >>
Trading Center