Credit bureaus are agencies that research and collect consumers’ credit information. In the United States there are three primary credit reporting agencies: Experian, Equifax and TransUnion. Utilizing standard computations, these agencies collect information and tabulate it in a numerical equation that results in an individual’s credit score. It is important for you to understand not only what credit bureaus collect but also how these reporting agencies can personally impact you.
Fair Credit Reporting Act
Credit bureaus are independent agencies that are governed by the Fair Credit Reporting Act (FCRA). The FCRA is a law designed to promote accuracy, fairness and privacy as they relate to consumers’ financial information and how reporting agencies distribute and interpret the information. The Federal Trade Commission provides a detailed, in-depth view of what an individual’s rights are under the FCRA.
What Credit Bureaus Do and What They Don’t Do
Credit bureaus use collected information from an individual to establish a credit score for them. These bureaus do not, however, make decisions based on this score. Instead, they make the score (and the information that resulted in the score) available to businesses and requesting entities.
Information Credit Bureaus Use
Credit bureaus use a variety of information to establish your credit report and credit score. Personal information such as name, address, birth date, and current and previous employers are ingredients of a credit report. Credit bureaus also use financial information such as your bill-paying history, outstanding loans and tax liens. Judgments, bankruptcies and other pieces of your public record information are also considered a part of the credit report and resulting credit score.
Information Not Used by Credit Bureaus
When credit bureaus create consumer credit reports, they leave out information deemed irrelevant to the reports and their connected credit scores. Information such as an individual’s race, religion and health situation are not included. The person’s criminal and driving records are also not included. Additionally, credit reporting agencies do not consider an individual’s bank account balance or income when creating a credit report or credit score for them.
The FCRA provides consumers with specific rights in regard to credit reports and credit scores. One of these is that people have the right to review their credit report and score. Also, they have the right to submit corrections to erroneous or false information included in the report. In addition, they have the right to request outdated information to be removed from their report.
Understanding how credit reporting agencies work affords you the opportunity to better manage not only your personal financial information, but also how that information impacts your financial moves. Recognizing what information a credit bureau collects and what a credit bureau overlooks is critical, particularly when you are reviewing your credit report and credit score. Maintaining vigilance with the credit bureaus also allows you to appropriately manage harmful information. Unfortunately, credit bureaus do not filter information, and so that becomes your responsibility as a consumer.