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The Credit Bureau - How it Affects You!
A credit bureau plays an important role in your financial stability, especially when it relates to your credit history. There are three credit reporting bureaus in the United States: TransUnion, Experian, and Equifax.
Each of these companies hold a copy of your credit report, and give it out to those you may be wishing to borrow money from.
Function Of A Credit Bureau
So, how does a credit bureau work, and exactly how does it affect you? The idea is relatively simple. Any time you borrow money, fail to make a payment, or any other transaction occurs that shows how stable you are financially, the bank that you are dealing with ends up reporting to the credit bureau the details of the transaction. The credit bureau will then give you a score, often called a credit history. This score represents their opinion, based on the data they have received, of how risky of a person you are to loan money to. New potential lenders and others look at this credit bureau report about your financial health to determine if they are willing to loan you money or not.
Forming A Credit Bureau
A credit bureau is usually formed through banks and the government working together to start the company. The government ensures that the bureau operates within the law, and the banks agree to send financial information to the agency. In return, the agency will provide a credit score to the banks for potential borrowers. This process usually takes a while, and often is started with support from the government.
Credit Bureaus Abroad
Most developed countries have some version of a credit bureau. The laws and such surrounding these companies vary from country to country, but the basic function remains the same. For example, in the United Kingdom, these companies are called credit reference agencies. They also use Experian, and Equifax, but their third agency is Callcredit. Countries such as India and Thailand also have their own versions of credit information companies.
Continue to: Rules for credit reporting bureaus
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