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What is a credit bureau?

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βˆ™ 2006-08-11 23:52:56

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A credit bureau (U.S.), or credit reference agency (UK) is a company that provides credit information on individual borrowers. This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate applied to loans. Interest rates are not the same for everyone, but instead are based on risk-based pricing, a form of price discrimination based on the different expected costs of different borrowers, as set out in their credit rating. Credit bureaus collect and collate personal financial data on individuals, from financial institutions with which they have a relationship. The data are aggregated and the resulting information is made available on request to contributing companies for the purposes of credit assessment and credit scoring. Given the large number of consumer borrowers, these credit scores tend to be mechanistic. In other words, the different credit bureaus collect data from a variety of sources and then apply a mathematical algorithm to assess the likelihood that an individual will repay a given debt given the frequency that other individuals in similar situations have defaulted. Given the mechanical nature of this calculation, an individual's credit score is highly dependent on the information input into the algorithm. If a credit bureau has collected inaccurate or misleading data, an individual's credit score could be adversely effected as a result. Consequently, 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. 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. Most credit history information is collected and kept by the three national credit bureaus, Experian (which purchased the files and other assets of TRW), Equifax, and TransUnion. These organizations are for-profit entities and possess no governmental affiliation. Experian handles its credit disputes in its "National Consumer Assistance Center" (NCAC) in Allen, Texas. It has its headquarters in Costa Mesa, California. Equifax subcontracts out most of its consumer relations. Telephone disputes or requests are diverted to a Canadian company/vendor named ICT. Mail disputes or requests sent to its Georgia post office boxes are opened by another vendor, Innasource, scanned to a computer file and then electronically sent to a subcontract vendor either in Montego Bay, Jamaica, or in the Philippines. Equifax is based in Atlanta. Trans Union handles its own disputes at the current time. It does so either in Pennsylvania or in California. Trans Union is based in Chicago. United Kingdom In the United Kingdom, the three credit reference agencies are Experian, Equifax and CallCredit, which was established in 2001. 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 acts, which require 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 under UK law by the Consumer Credit Act 1974.

2006-08-11 23:52:56
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Related Questions

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A Wizard credit check can be performed by going to a credit bureau and getting help from the credit bureau. Another way to do it is through an online credit bureau.


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Can you get a free credit report by contacting the credit bureau?

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