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Credit Bureau
A credit bureau is sometimes called as credit reference agency. It is a company that supplies information on individual borrowers. Often lenders get data about borrowers from various bureaus and assess the credit worthiness of the borrowers. They can decide extending loans to them based on their past borrowing and repayment behavior which can be determined from the data provided by the bureau.
Higher the likelihood of the repayment of a borrower, lower the interest rates. So interest rates are based on their past behavior and not same for all the borrowers. This method is known as risk-based pricing.
Credit bureaus gather information on financial behavior of individuals from various financial institutions and other sources. The raw data is processed and the resulting information is provided to the lenders on request. Based on that data the contributing companies or lenders will determine the credit worthiness by credit assessment and credit scoring.
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