What a Credit Bureau Does and Can You Trust Them

One of the most important things that you have to be concerned with once you are an adult is your credit rating. While one wishes to have enough cash to buy anything in life, that just does not happen for everyone. With the passage of time, you are in need of things that you can’t afford with cash and so you have to borrow money from a lender. The lender can be a financial institution like a bank or other private companies. Before they give you the desired money, they have to check if you are reliable enough to be given that money. To check your information they have to get your credit report from the credit bureau.

The Function of a Credit Bureau

You can already tell from the name that this entity is meant to deal with credit transactions. If you are someone who hasn’t ever had to buy anything on credit, you might not even be in their records. However, if you have borrowed money to buy something, you will be on their records. In simple words, credit bureau is like an agency that collects the information of your credit transactions and maintains it in the form of a history. Based on how good or bad you have been with dealing with the credit available to you, the credit bureau gives you a credit rating.

Now, why does a credit bureau have to maintain your record? Why can’t the company you are borrowing the money or purchasing the product from maintain the record? The thing is, there has to be a central authority from where lenders can pull the information about the credit history of the borrowers. Imagine a world in which there were no credit bureaus. Imagine yourself as the lender. A Person named John comes to you and wants to get loan from you to buy a house. How would you know if John will return you the borrowed money?

The purpose of the credit bureau is more like acting as a database. It is the storage where the files of Americans who buy things on credit are stored. If you are a lender who is about to forward a loan to someone, you will reach out into the records and pick out the file of that person. That file is termed as the credit report. The overall condition of the borrower in terms of handling credit is depicted in the form of a credit score. Without even looking deep into the records, you can just see the score and know the financial standing of the borrower.

It is important here to know that the information the credit bureaus save in your credit history is available to the lenders. The credit bureau literally sells that information to the companies so they can know the borrower before forwarding the loan. The most important thing to know here is that there is not one but multiple credit bureaus in the US. The three biggest and most reliable ones are called the major credit bureaus. The names of these bureaus are Experian, TransUnion, and Equifax. You can trust the report of any credit bureau from these three.

Can You Trust a Credit Bureau?

You can trust any credit bureau out of the three mentioned above. These are the biggest and the most reliable credit bureaus of the country. For your peace of mind, you should also know that the government is there to govern them on what they are doing. These credit bureaus are not free to operate however they want. In fact, there are certain rules, regulations, and laws they have to follow while maintaining your information to remain operational. One must not forget that the information credit bureaus record is of the most sensitive nature. FCRA is the legislation that controls and governs the operations of these major credit bureaus.

One thing that you will notice when you receive the reports from these bureaus is the difference in their rating or scoring. The minor difference a credit bureau shows in your credit score is only because how they make the calculations. The differences are not huge in the first place. There are certain scoring models that these agencies use to give you a score. That’s the reason you will almost always see a difference in the credit score offered by credit bureau A from that of credit bureau B. When it comes to trust, you can trust the score of any. The more important thing is to know which credit bureau’s scoring your lender is using.

Be Up to Date with Your Credit Score

It does not mean which credit bureau you prefer for your credit score, you have to keep an eye on it at all times. When you go out shopping on credit, you will have to keep that score in mind. When your score is low, you suffer in one or the other way. In one way, you are denied the loan in the first place. When your credit score is close to being low, the interest rates will be very high for you. In either case, you will have to pay the price. It is therefore highly recommended that you keep checking your credit score more often than not. When you find out the credit score for free using the website of a credit bureau, it is called a soft inquiry. It does not negatively impact your credit score.

Final Thoughts

In the end, you will have to trust the credit bureau. It is not doing anything other than collecting your information and providing it to other companies so they can decide whether to forward loans or not. It should not matter to you which credit bureau your lender is pulling your credit report from. What really matters is you having an excellent one. To do that, you have to repay your loans on time. You have to use your credit limits sensibly. There are many other steps you can take to improve your credit score to live a happy financial life.