Finances & Money

How Do Credit Bureaus Work?

The Credit Reporting Agencies (CRA) is responsible for gathering all of the required information about you so it is important to be knowledgeable about how they work. Your credit scores, history and reports are critical so make sure that you have your facts straight. Consumers can go to the three major CRAs to check and assess their credit reports.

The three major CRAs are Experian, Equifax and TransUnion. Aside from them, there are other existing credit bureaus in the business. Even with the availability of these bureaus, there are people who are still confused about what they really do. This is a guide to help you know more about how these corporations work.

What Do They Do?

The most direct answer to this question is that they compile information regarding your credit history so that lenders can determine the risks they would be facing by giving you a loan or credit card. The main credit bureaus are all for profit organizations and are not government-owned. They will be responsible for reporting your information to credit card companies, lending institutions and other financial organizations. They are also responsible in assessing your credit history and turn it into credit reports.

Why Do We Have Credit Bureaus?

CRAs exist to help borrowers with the vetting method. Before credit bureaus existed, people would lend money anytime they want without having the advantage of having able to check the borrower’s credit history. Loans were just given away based on trust. However, as cities began to advance, and more people begin needing loans and credit cards, lenders find it harder to know who’s going to pay their bills. Therefore, credit bureaus were created.

What Information Do They Collect?

Your credit reports contain information about your current credit accounts and history of payments from different financial organizations such as lending companies, banks and other lenders that you have partnered in the past.

Other businesses such as city service providers and telecommunications companies can also report info to the credit bureaus. But non-lending companies like these only report overdue payments and other negative information.

The main credit bureaus collect dozens of information but there are only 5 main factors on your credit reports. These are usually used to determine how creditworthy you are when you apply for a line of credit or personal loan. These factors are your history of payments, kinds of credit accounts, your current balance, duration of existing debts and how many hard inquiries you’ve had.

How Is Credit Report Maintained

CRAs submit your credit scores and reports to insurers and other businesses that require it as permitted by law. When you avail for a new credit card or loan, the lender asks for a copy of your credit report from the credit bureaus. The lender will then assess your credit score and report and other requirements you will provide to determine if you are worthy of lending money. If your application is approved, the new loan or credit card will now be added to your existing credit report and will be updated every month. These updates show information about how their customers pay and use their accounts.

How Do You Get A Copy Of Your Credit Reports

The law permits you to one free credit report from every major credit bureau once per year. You can request your free credit report at a website called If you will need extra copies of your credit report, you can pay for more directly from the major credit bureaus. You can also see a free screenshot of your credit report from By regularly checking your report, you will get an insight on how well you are managing your credits.


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Susan Paige

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