Given the immense impact that credit bureaus can have on your credit score, it is imperative that you learn everything you can about them. While a lot of people are vaguely familiar with the term "credit bureau", most do not know as much as they should. There are three major bureaus: Equifax, Experian, and TransUnion. The more you learn about this particular subject, the easier it will be for you to build up and maintain a solid overall credit score.
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What do Credit Bureaus do?
Basically, credit bureaus or consumer reporting agencies as they are also sometimes called, gather detailed information about your credit history so that lenders will be able to assess how much of a potential liability you are going to be. Whether it is applying for an online loan or a new credit card, you will always need to submit to a credit check. The information that these lenders get from the credit checks they run come from credit bureaus.
What information does it gather?
Your credit report contains all of the details pertaining to your current credit accounts as well as your overall payment history with lenders of all kinds. The three major bureaus collect a variety of information on you, but there are just a few different factors that will ultimately determine whether or not your credit is good enough to get the loans you need. These factors include your payment history, the types of accounts in your report, the amount of debt you currently have, how long you have had credit, and the number of hard inquiries that have been made regarding your file.
What does they do with the information they gather?
When a bureau has gathered all the necessary information listed above, they will put together an entire credit report and sell all of it back to lenders. These lenders can use this information to determine how much of a risk or liability you are going to be when it comes to paying back the money you borrow. The lenders that you apply to for a loan will carefully look over your credit report so they can reach a final decision as to whether or not to give you the money you need.
Credit bureaus can sell your credit information to lenders, landlords, utility companies, insurance companies, and others. As long as the financial institution or company has a reasonable purpose for needing the information, they can purchase it from the credit bureau. This is not only completely legal, but it is also standard practice.
What makes up your Credit Report?
The reports consist of a lot of different things, including late payments, current debts, bankruptcies, judgments, tax liens, and other things. You will also find that there aren't any personal details in your credit report, such as your age, gender, or religion. A majority of the information on a person's credit report tends to expire after a period of 5-10 years, though it does vary depending on a number of factors. It is highly recommended that you take a close look at your credit report at least once a year so you can see if there is any inaccurate information on it. Mistakes sometimes happen, and you will need to make sure that there is nothing in your credit report that shouldn't be there.
Credit bureaus are also responsible for investigating any alleged disputes. If you take a look at your credit report and discover that there is a mistake of some kind, you will be able to send an official credit dispute to the appropriate bureaus. Some of the different kinds of mistakes that people sometimes find on their credit reports include a misspelled name, a completely unfamiliar credit line, a late payment on an account that you paid on time, an incorrect credit limit or balance, and a collection account for a trade line you have already paid off in full.
You will find that credit bureaus can also place a fraud alert on your report if you suspect that any of your personal or financial information has been compromised by someone. By placing a fraud alert on your credit report, you will be able to effectively protect yourself from having your identity stolen. These types of thieves can do a lot of damage to a person's credit report, which is why it is so important that you have a fraud alert placed on your report the second you suspect your information has been stolen.
There is an initial fraud alert, which lasts no longer than 90 days. You can choose to renew the alert after the 90 day period has expired though. An extended fraud alert will last up to 7 years, and it is most likely the best option if your personal and/or financial information has already been used by a thief. An active military alert can be placed on your credit report, which will last just one year. Those who are deployed abroad will find that this is probably the best option.
Every single one of the three major credit bureaus offers credit monitoring and theft protection services, which are subscription-based. There are some minor differences with these services depending on the organization, but most will provide you with year-round access to your reports and scores. You will also be able to get alerts whenever there are any noteworthy changes to your credit reports. By taking advantage of these credit monitoring services, you will be able to lock and unlock all of your credit reports when you need to.
What to Consider
While it is true that credit bureaus can help you out in a lot of ways, they can also lower your credit worthiness significantly if you are late on payments or do not pay back money you owe to creditors. It is very important that you take a close look at the credit reports these bureaus put together on you so that you will know exactly where you stand in terms of your overall credit.