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.

  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 Mix

    The types of accounts that make up a consumer’s credit report. ...
  4. Thin File

    A limited credit history which can make it difficult to get credit ...
  5. FICO Score

    A FICO score is a type of credit score that makes up a substantial ...
  6. Trade Line

    A trade line is a record of activity for any type of credit extended ...
Related Articles
  1. Personal Finance

    The Top Three Credit Bureaus

    A discussion of the top three credit bureaus: what they do, how they develop your credit score – and why the credit scores they assign you may differ.
  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

    Credit Score vs. Credit Report: Which Is Better?

    They sound alike, but can serve very different ends.
  4. Personal Finance

    What Is the Lowest Credit Score?

    Learn about the different types of credit scores available to borrowers, and find out about the lowest scores under each one of those credit scores.
  5. Personal Finance

    Do You Understand Your Credit Score?

    Most Americans don't really understand their credit scores. Find out what you need to know.
  6. Personal Finance

    Which Is More Important: Credit Report or Credit Score?

    Here's the difference between a credit report and credit score, and which is more important.
  7. Personal Finance

    Fixing Your Credit Score: A Do It Yourself Guide

    Following these five steps can go a long way toward repairing a low score.
  8. Personal Finance

    How Your Credit Score Compares to the Average American's

    While only a small percentage of Americans have terrible credit scores, a whopping 30% have poor or bad credit, according to the Consumer Financial Protection Bureau.
  9. Personal Finance

    Top Places To Get A Free Credit Score Or Report

    When's the last time you checked your credit report? With all the hacking out there, don't wait for the car dealer to find problems when you need a loan.
  10. Personal Finance

    Why You Should Improve Your Credit and How to Do It

    With credit playing a big role in many financial decisions, it is important to maintain good credit.
  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. How do credit bureaus make money?

    Take a closer look at how credit bureaus make money, and learn about the kind of services they provide to both lenders and ... Read Answer >>
Trading Center