What Are Credit Bureaus

By definition a credit bureau is an agency which collects and sells information about the creditworthiness of other people and businesses. It collects information about your credit history including how much credit you have available to you, what your balance is and your payment history.

A credit bureau or agency compiles the information to give individuals a credit score, which is a number lenders use to evaluate the risk of lending money or giving credit to you. They also generate reports of your financial history and sell them to prospective lenders. This information is used to not only determine whether or not to extend credit to you but at what interest rate. This is one of the reasons it is extremely helpful to have good credit. It could mean the difference between a 1% car loan and a 10% car loan – potentially thousands of dollars depending on the cost of the car.

Here's what a credit bureau does not do:

A credit bureau does not make any decisions about whether or not you should be given credit or a loan. They simply exist as an information collection agency, it just so happens that all the information they collect is directly related to your credit history. This means loans, credit cards and bank account information will all be present for creditors to evaluate their lending decision on.

The three largest credit agencies are:

* Equifax
* Experian
* TransUnion

According to the Fair Reporting Credit Act, citizens of the United States are entitled to one free credit report each year. These can be obtained at http://www.Annualcreditreport.com. This is the only place you can take advantage of an entirely free credit report. If you see the words “free credit report” on any credit reporting site, it is likely a promotional offer to get you to become a member and there will be fees charged on your credit card at a later date.

It is important to take advantage of your free credit report because it helps you stay on top of your credit score, but more importantly it protects you against identity theft. When you view your credit report you can easily see if any accounts have been opened in your name. When you find discrepancies, contact the organization immediately. While it can take some time to clear your identity and clean up your credit after being a victim of identity theft, the good news is that you are not responsible for the debt.