The 100 Most Popular Financial Terms Explained by Thomas M. Herold - HTML preview

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What are Credit Bureaus?

 

Credit bureaus are agencies that collect financial information. They go by different names in various countries around the world. In the United Kingdom they are known as credit reference agencies. In Australia, the bureaus are called credit reporting bodies. India knows their credit agencies as credit information companies.

 

Within the United States, these organizations are called consumer reporting agencies. Whatever name they go by, they all serve the same function. The bureaus gather information from banks and other financial sources to deliver consumer credit information about individual consumers.

 

The U.S. consumer reporting agencies are governed by the Fair Credit Reporting Act. Other laws that regulate the activities of the bureaus are the Fair and Accurate Credit Transactions Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, and Regulation B. These acts attempt to safeguard consumers against unfair practices and mistakes made by the data providers and the credit reporting agencies themselves.

 

The U.S. has two separate government organizations who oversee the credit bureaus and their data suppliers. These are the FTC and the OCC. Primary oversight of the credit reporting agencies as they deal with consumers belongs to the Federal Trade Commission. The banks are monitored for all of the information that they provide the reporting agencies by the Office of the Controller of the Currency. This government agency supervises, regulates, and charters all of the national banks and any information they turn over to the consumer credit reporting agencies.

 

Three main credit reporting bureaus dominate nearly all credit reporting in the U.S. These are Experian, Equifax, and TransUnion. None of these three agencies are owned by government entities. All of them exist as companies seeking to make a profit and are traded publically. They are carefully monitored for fairness by the government provided oversight organizations.

 

The consumer reporting agencies operate through a vast network with the credit card issuing companies, banks, and other financial entities with which individuals have accounts. All of these ties ensure that credit account information and histories show up on the credit reports of one, two, or even all of the bureaus.

 

The credit bureaus compile all of this information into a consumer credit report. They each then utilize proprietary trade secret formulas to determine every individual’s FICO credit score. Each of the three bureaus formulates its own score that is different from that of its competitors. They also come up with educational credit score numbers which are often vastly different from the official scores.

 

Consumers do not have to settle for educational credit scores. They have the rights to see what is on their credit reports. Each and every year, individuals are able to obtain an official credit report from each of the three credit bureaus. This can be done by going to the government mandated website AnnualCreditReport.com.

 

Besides this, consumers are allowed to go to the websites of the three main consumer reporting agencies and order credit reports and scores from them directly. The only way to get the official credit score is to pay for and order it from the credit bureaus themselves. These are not provided in the annual free reports. Experian and Equifax offer all three credit reports in a single convenient to view document.

 

Sometimes the credit bureaus will make mistakes with individuals’ credit reports. When this happens, it is important to get in touch with the credit bureau itself in order to dispute any information that is inaccurate. These organizations also should be contacted directly if there is concern about fraud so that they can place a security alert or fraud alert on the person’s credit report.