credit bureau

An organization to which business firms apply for credit information on prospective customers.

An agency that researches and collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies and other financing companies. Also commonly referred to as consumer reporting agency or credit reporting agency.

Investopedia Says:
A credit bureau doesn't decide whether an individual qualifies for credit or not. It only collects information that it considers relevant to a person's credit history and habits.
The three main credit bureaus in the United States are Equifax, Experian and Trans Union.

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Agency gathering data for banks, savings institutions, and other credit grantors on consumers' experience-their credit history-meeting obligations, based on information reported by credit grantors. This information is distributed for a fee to other credit grantors, who use it in deciding whether to approve or decline credit applications, and how much credit to offer any particular borrower. For example, credit card issuers offering preapproved credit cards routinely determine who gets an offer by screening credit bureau reports; accepting a card on the terms offered will open an account.

Amendments to the Equal Credit Opportunity Act in 1996 broadened the rights of consumers (who were allowed to review their credit reports and dispute inaccurate information) by requiring credit bureaus to maintain a toll-free consumer service telephone number and to disclose the names of organizations requesting a consumer's credit report. Credit information is gathered by about 500 regional credit bureaus that report to three nationwide automated systems: Equifax, Inc., 1600 Peachtree Street NE, Atlanta, Georgia; Experian Information Solutions, 505 City Parkway West, Orange, California; and Trans Union LLC, 555 West Adams Street, Chicago, Illinois.

A credit bureau is an agency that collects and sells information about the creditworthiness, or the ability to meet debt obligations, of individuals or companies. Consumer credit bureaus maintain and report on this information for individuals, while commercial credit bureaus collect and distribute this information for businesses. A synonym for a credit bureau is a credit reporting agency. Credit bureaus provide information to a number of clients, including merchants that extend credit to consumers and businesses that extend credit to other businesses. Credit bureaus may be private enterprises or may be operated as cooperatives by merchants in a particular geographic area. Users of the services typically pay either a fee based on their amount of usage or a flat membership charge.

Credit bureaus serve as a clearinghouse for credit history information. Credit grantors provide the bureaus with information about how credit customers pay their bills, and the bureaus assemble this information into a file on every consumer or business. Credit grantors can obtain credit reports about potential customers who wish to open accounts. There are over 1,000 local and regional consumer credit bureaus throughout the United States, and most are either owned or under contract with one of the nation's three major consumer credit reporting agencies: Trans Union, Equifax, and Experion.

The largest player in the commercial credit reporting business is Dun and Bradstreet Corp. According to Elayne Robertson Demby in Collections and Credit Risk, Dun and Bradstreet maintains a database on nearly 60 million public and private businesses worldwide, including 12 million American firms. But the rapid increase in e-commerce has changed the commercial credit reporting business in a number of ways. Customers have begun to demand information more quickly and in condensed, ready-to-use form, and a number of Internet-based credit bureaus have developed to meet these needs.

The History of Credit Bureaus

Cooperative credit bureaus were known in some countries from the early 1860s, but the industry experienced rapid growth only after World War I. They were originally organized to facilitate the exchange of credit information among merchants. Until the arrival of credit bureaus, the very small amount of credit granted was based on the merchant's own knowledge of the customer.

The earliest credit bureaus just maintained lists of customers who were considered by the merchants to be poor risks. After World War I, however, the U.S. population became more mobile and credit bureaus expanded to serve a wider audience of dispersed merchants. The bureaus filled a void by providing these merchants with information that could be used to make decisions on whether to grant credit. Prior to the development of automatic data-processing equipment and high-speed computers that can process a variety of credit data, merchants or businesses that granted credit could only rely on a person's employment records, information from landlords, data in public records and newspapers, and direct investigations of the individual.

Consumer Credit Bureaus Today

The three major consumer credit bureaus in the U.S. are affiliated with the Associated Credit Bureaus, Inc. This international trade association, founded in 1906, provides its members with fraud prevention and risk management products, credit and mortgage reports, tenant and employment screening services, check fraud and verification services, and collection services. The Associated Credit Bureaus, Inc. represents the consumer credit reporting information industry before state and federal legislators. It also represents the industry before the media in consumer credit reporting matters. Over 500 American credit reporting agencies, mortgage reporting companies, collection services, and tenant screening and employment reporting companies are members.

Consumer credit bureaus are important and growing because some one billion credit cards are in use in the United States today. A similar number of consumer credit reports are issued annually in the United States. Two billion pieces of data are entered monthly into credit records. Each of the three major consumer credit reporting systems—Equifax, Experian, and Trans Union—maintains 190 million credit files, which are used by independent credit reporting agencies across the United States.

According to Sidney Hill, Jr., in an article for Collections and Credit Risk, consumers will soon get a chance to see their credit scores and learn how they really rank with lenders. The long-secret credit scores lenders use to make decisions about loans and credit cards will soon be made available via the Web, along with information about how the scores are derived and how they can be improved. The impetus for the change came from a flurry of state and federal legislation aimed at protecting the privacy of personal data while also granting consumers access to their own credit information. Credit-card companies have increasingly come to rely on risk-based credit scoring to determine an individual's credit worthiness, and these scores and how they were determined were not previously available to consumers. The scores are designed to measure how likely a person is to repay a debt and are a key factor in determining if a person can get credit and at what cost. By the end of 2000, each of the three major consumer credit reporting agencies expected to make some of this information available over the Internet.

The Three Major Consumer Credit Bureaus

EQUIFAX. Equifax serves the financial services, retail, credit card, telecommunications/utilities, transportation, information technology, and health care industries, as well as government. Global operations include consumer and commercial credit information services, payment services, software, modeling, analytics, consulting and direct-to-consumer services. Equifax provides services and systems that help grant credit, authorize and process credit card and check transactions, manage receivables, authenticate, identify and manage digital certificates, predict consumer behavior, market products, and manage risk. Equifax serves the U.S., Chile, Argentina, U.K., Spain, Portugal, Canada, Peru, El Salvador, and Brazil.

EXPERIAN. According to its mission statement, Experian uses the power of information to help its clients target prospective customers, manage existing customer relationships, and identify opportunities for profitable growth. Through its Web-based products and services, Experian enables clients to conduct secure and profitable e-business. Experian is a subsidiary of The Great Universal Stores PLC and has headquarters in Nottingham, U.K., and Orange, California. Its 12,000 employees support clients in over 50 countries and annual company sales are $1.5 billion.

TRANS UNION. Trans Union is the third primary source of credit information and also offers risk and portfolio management services. They serve a broad range of industries that routinely evaluate credit risk or verify information about their customers, which includes financial and banking services, insurance agencies, retailers, collection agencies, communication and energy companies, and hospitals. Trans Union operates nationwide through a network of offices and independent credit bureaus. They have many subsidiaries and divisions in the U.S. and abroad.

Commercial Credit Bureaus

The Internet has created a number of changes in the commercial credit reporting business. Electronic commerce and online business-to-business (B2B) transactions have expanded the need for commercial credit checks to include small businesses and foreign firms. In the meantime, the instantaneous transfer of information over the Internet has caused client companies to expand their expectations about the manner in which they receive credit reports. "With more companies doing business with smaller firms and companies overseas, obtaining credit information on those businesses is more important today than ever," Demby noted. "Customers are demanding more information faster, and in a format that allows them to make rapid-fire decisions about whether or not to grant credit."

The changing demands of client companies has increased competition among commercial credit bureaus. Many new players have sprung up online, where they are collecting newly available data and distributing it at a lower cost than traditional reporting firms. For example, CreditRiskMonitor.com, established in 1997, is an Internet-based credit reporting agency that provides up-to-the-minute data and credit analysis on 10,000 public U.S. companies. In 2001, the company plans to expand its offerings to include foreign and private companies. Another new online service, called Debt Watcher, gives companies an opportunity to see if an individual or company they do business with has been reported to a collections agency.

In addition to increased competition from Internet-based reporting agencies, commercial credit bureaus face several new business trends in the twenty-first century. For example, more commercial credit reporting agencies are beginning to offer information on small businesses, which represent an increasing share of the overall market. Consumer credit expert Experion has begun offering a commercial credit service that combines a small business's financial information with personal information about the small business owner to create a risk score. Another emerging trend involves providing credit information in real time in order to assist clients in making quick decisions about whether or not to extend credit. Instead of providing a mass of financial information, many commercial credit bureaus are moving toward evaluating the information in advance and providing clients with credit scores.

Further Reading:

Bennett, Andrea. "Credit Scores Are Due to Go Public." Money. August 1, 2000.

"Check Your Credit." Phoenix Business Journal. September 22, 2000.

Demby, Elayne Robertson. "Getting a Line on Lending." Collections and Credit Risk. January 2001.

Hill, Sidney, Jr. "Hungry for Credit Data?" Collections and Credit Risk. August 31, 2000.

For more information on credit bureau, visit Britannica.com.

A privately owned, profit-making establishment that — as a regular business — collects and compiles data regarding the solvency, character, responsibility, and reputation of a particular individual or business in order to furnish such information to subscribers, in the form of a report allowing them to evaluate the financial stability of the subject of the report.

Credit bureaus ordinarily prepare and issue reports for lending institutions and stores that investigate the financial reliability of an applicant for credit prior to the execution of the credit agreement.

Credit bureaus are regulated by the Federal Fair Credit Reporting Act (15 U.S.C.A. § 1681 et seq. [1970]) and by state statute to safeguard against abusive and damaging practices.

The examples and perspective in this article may not represent a worldwide view of the subject. Please improve this article or discuss the issue on the talk page.

This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. Please improve this article by introducing more precise citations where appropriate. (July 2006)

A credit bureau (U.S.), or credit reference agency (UK) is a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses. It is an organization providing information on individuals borrowing and bill paying habits.^[1] This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate and other terms of a loan. Interest rates are not the same for everyone, but instead can be based on risk-based pricing, a form of price discrimination based on the different expected risks of different borrowers, as set out in their credit rating. Consumers with poor credit repayment histories or court adjudicated debt obligations like tax liens or bankruptcies will pay a higher annual interest rate than consumers who don't have these factors.

In the U.S., credit bureaus collect and collate personal information, financial data, and alternative data on individuals from a variety of sources called data furnishers with which the bureaus have a relationship. Data furnishers are typically creditors, lenders, utilities, debt collection agencies and the courts (i.e. public records) that a consumer has had a relationship or experience with. Data furnishers report their payment experience with the consumer to the credit bureaus. The data provided by the furnishers as well as collected by the bureaus are then aggregated into the credit bureau's data repository or files. The resulting information is made available on request to customers of the credit bureau for the purposes of credit assessment, credit scoring or for other purposes such as employment consideration or leasing an apartment. Given the large number of consumer borrowers, these credit scores tend to be mechanistic. To simplify the analytical process for their customers, the different credit bureaus can apply a mathematical algorithm to provide a score the customer can use to more rapidly assess the likelihood that an individual will repay a given debt given the frequency that other individuals in similar situations have defaulted. Most consumer welfare advocates advise individuals to review their credit reports at least once per year, in order to ensure that the reports are accurate. Consumers can do so at no cost. They are entitled to a free annual credit report from each of the three nationwide consumer reporting agencies, Equifax, Experian and TransUnion. Consumers can go to annualcreditreport.com, the Internet site maintained by the three companies, to get their free report.

Commercial credit reports and scoring also exist, which can be used to evaluate the likelihood of a business paying creditors. Examples of these are the Paydex score from Dun and Bradstreet and the Experian Intelliscore.

Contents 1 United States 1.1 Tort liability for business defamation 2 United Kingdom 3 India 4 See also 4.1 Major global bureaus 4.2 Lesser bureaus 4.3 National bureaus 5 References 6 External links

United States

In the United States, the legal term for a credit bureau under the federal Fair Credit Reporting Act (FCRA) is consumer reporting agency — often abbreviated in the industry as CRA.

In the United States, key credit bureau consumer protections and general rules or governing guidelines for both the credit bureaus and data furnishers are the federal Fair Credit Reporting Act (FCRA), Fair and Accurate Credit Transactions Act (FACTA), Fair Credit Billing Act (FCBA), and Regulation B.

Two government bodies share responsibility for the oversight of credit bureaus and those that furnish data to them. The Federal Trade Commission (FTC) has oversight for the consumer credit bureaus. The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks with regard to the data they furnish credit bureaus.

Most U.S. consumer credit information is collected and kept by the four national credit reporting agencies: Experian (which purchased the files and other assets of TRW), Equifax, TransUnion, and Innovis (which was purchased from First Data Corporation in 1999 by CBC Companies). These organizations are for-profit businesses and possess no government affiliation. Though they are competitors, they have formed a trade organization called the Consumer Data Industry Association (CDIA) to establish reporting standards and lobby on their behalf on consumer issues in Washington. Current reporting standards accepted by the four U.S. CRAs are Metro and Metro2. The Metro2 standard is defined in the annual CDIA publication, the Credit Reporting Resource Guide.

There are dozens of other similar information collection and reporting firms that analyze and sell information about consumers for other purposes, including those who aggregate multiple credit data sources and provide lenders with customized analytical tools.

PRBC (Payment Reporting Builds Credit, Inc.) is a national alternative credit bureau. Incorporated in March 2002, PRBC enables consumers to self-enroll and build a positive credit file by reporting their on-time payments (such as rent, utilities, cable, and phone) that are not automatically reported to the three traditional credit bureaus.

In the U.S., there are three business or commercial bureau repositories: Dun & Bradstreet, Experian Business, and Equifax Small Business Financial Exchange (SBFE)

Tort liability for business defamation

In the case of Dun & Bradstreet, Inc. v. Greenmoss Builders, 472 U.S. 749 (1985) the U.S. Supreme Court held that a credit reporting agency may be liable if it was careless in reporting an impending or past bankruptcy filing of a business that is not a public figure.

United Kingdom

In the United Kingdom, the three credit reference agencies are Experian, Equifax and Callcredit, which works closely with its US partner, TransUnion.

Most banks and other credit-granting organisations subscribe to one or more of these organisations to ensure the quality of their lending. This includes companies who sell goods or services on credit such as credit card issuers, utility companies and store card issuers. Subscribing organisations are expected to provide relevant data to maintain the common data pool.

Credit reference agencies are bound by the Data Protection Act, which requires that data relating to identifiable individuals must be accurate, relevant, held for a proper purpose and not out-of-date. Individuals have a legal right to access data held on them.

The activities of Credit Reference Agencies are governed by the Consumer Credit Act 1974.

India

The establishment of Credit Information Bureau (India) Limited (CIBIL), India's first Credit Information Bureau, is an effort made by the Government of India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing NPAs while improving credit grantors' portfolio quality.

CIBIL was promoted by State Bank of India (SBI), Housing Development Finance Corporation (HDFC), Dun & Bradstreet Information Services India Private Limited (D&B) and TransUnion International Inc. (TransUnion) to provide comprehensive credit information by collecting, collating and disseminating credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members.

This section may require cleanup to meet Wikipedia's quality standards. Please improve this section if you can. (October 2008)

The promoters SBI and HDFC divested a part of their stake to other shareholders and the revised shareholding stands as follows:

Shareholder Holding%

SBI 10.0%

HDFC 10.0%

Dun & Bradstreet 10.0%

Trans Union 10.0%

ICICI Bank 10.0%

Bank of Baroda 5.0%

Bank of India 5.0%

HSBC 5.0%

IOB 5.0%

PNB 5.0%

Union Bank 5.0%

Citicorp Finance 5.0%

Central Bank 5.0%

Stan C k 5.0%

Sundaram Finance 2.5%

GE Strategic Investments India 2.5%

Total 100.0%

See also

Major global bureaus

• Equifax
• Experian
• TransUnion
• Mira Inform Private Limited

Lesser bureaus

• Innovis
• PRBC

National bureaus

CreditReturn First American Credco Veda Advantage (Formerly Baycorp Advantage) Callcredit CIBIL CRO:: Credit Registration Office Compuscan CRIF

El Buró de Crédito Irish Credit Bureau KKB Schufa pl:Biuro Informacji Kredytowej International Credit Bureau - Міжнародне бюро кредитних історій

• National Credit Information Bureau (GEORGIA) - ეროვნული საკრედიტო ინფორმაციის ბიურო

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References

1. ^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 512. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4. 

External links

This article's external links may not follow Wikipedia's content policies or guidelines. Please improve this article by removing excessive or inappropriate external links.

• Consumer Data Industry Association
• Federal Trade Commission Governmental Page on Free Credit Reports
• Federal Trade Commission Governmental Page on FCRA and consumer rights
• OCC - Office of the Comptroller of the Currency
• Dun and Bradstreet
• "Credit-Information Reporting: Why Free Speech Is Vital to Social Accountability and Consumer Opportunity" by Daniel Klein
• Stoozing guide to UK CRA suppliers
• First Credit Information Bureau in India
• South African Credit Bureau
• First Ugandan Credit Bureau

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