Thursday, January 9, 2014

What is the Function of a Credit Reporting Bureau?

A credit reporting bureau has a very important job in the United States. These bureaus collect financial information about consumers. The information is stored and compiled into a report, which is presented to lenders who are considering allowing that individual to borrow money. The credit bureaus also use the information they collect about each consumer to assign him a credit score. This credit score has a profound impact on whether a lender will allow a debtor to borrow money, and at what interest rate.
Credit Reporting Bureaus Collect Data

Credit reporting bureaus collect data about almost everything that you do with your debts and your credit. For example, credit reporting bureaus have information about all accounts that you have opened, as well as accounts that have been recently closed. Lenders including car financing companies; mortgage providers; banks that issue personal loans; and credit card companies all provide information to the credit reporting bureaus. This information includes details like the available credit limit you have, the age of your accounts, how much new credit you have recently applied for and whether you have paid your bills on time or not. All this data, together, paints a very detailed picture of how responsible you have been with borrowing money over your life.

Credit Reporting Bureaus Give you a Score

Once the data on your borrowing behavior is collected, credit reporting bureaus use proprietary formulas to determine what your credit score is. While each of the three major credit bureaus in the U.S. may have slightly different proprietary formulas, the basic factors that the bureaus look at in determining your score are largely the same. To determine a credit score, the credit bureaus look at whether you have always been on time with payments; whether you are using 30 percent or less of your credit; whether you have a long history of responsible borrowing; whether you have a mix of different kinds of debt; and whether you have avoided applying for too much new debt in a short period of time. If the answers to all of these questions is yes, you likely have a good credit score.  

Checking Your Credit Report and Score

While credit reporting bureaus have an important job and usually do it well, mistakes can be made. It is important to check your own score and report with the credit reporting bureau to make sure the information on your report belongs there. A service such as IDENTITY GUARD® can make it possible to check your report and score so you can see how your score measures up. Visit Credit Report 123 today to learn more.

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