What are Credit Bureaus and What Do they Do?

The main responsibility of credit bureaus, often called Consumer Reporting Agencies (CRA), is to collect personal information, financial records, and alternative data on consumers. They then use this information mainly to determine individual’s credit scores, which they can then sell to banks and lenders for their own private use.

To begin, most credit bureaus will obtain records on consumers from creditors, lenders, debt collection agencies, and courts. Upon obtaining these records, they mathematically determine that consumer’s credit score using their individualized process. With this information, they can sell these scores to banks and lenders, allowing them to determine whether or not to give that consumer a loan or mortgage.

Not only do the big three credit bureaus Experian, Equifax, and Transunion exist to determine individual credit scores, but there are also dozens of other smaller credit bureaus as well. They exist to aggregate these credit scores and other personal financial date to present a clearer picture to banks and lenders. Credit bureaus are very influential in all areas of the financial market, and are watched and oftentimes scrutinized by the American government through the Federal Trade Commission (FTC), which helps monitor the data that credit bureaus receive.

Not only are credit bureaus responsible for working with banks and lenders, but general consumers as well. Government legislation has stated that annually, every consumer is allowed one credit score report from each of the individual big three credit score corporations for free. This gives consumers the ability to evaluate their financial stability, along with their spending and payment habits. They have the chance to correct their financial mistakes before they become true financial burdens.

The credit bureaus’ purpose is to present accurate information about financial stability about consumers to both banks and lending companies along with individuals. This makes them an incredibly important financial institution. Without them, banks would find it far more difficult in deciding upon loan rates to consumers, and strong candidates may have a more difficult time in obtaining a loan or a mortgage.

Jonathan Boral

Jonathan Boral

Jonathan Boral, a junior at the University of North Carolina’s Kenan-Flagler Business School, grew up in Charlotte, North Carolina an avid fan of film, television, and music. He has spent many hours finding the delicate balance between his love for acting, business, and the entertainment industry. Through his school career, he has appeared in several different shows, including the musical Annie and Laughter on the 23rd Floor. Not only as an actor, but he has also been able to see the production side of shows as the Stage Manager for Oh Dad, Poor Dad, Momma’s Hung You in the Closet and I’m Feeling So Sad. Constantly finding new ways to study the business and production aspects of film and television, he has spent time researching box office returns and film production values, in hopes to one day writing for an entertainment journal, or working as a film producer or talent agent. He plans on further pursuing his knowledge of the business world by becoming an active member of the Marketing and Entrepreneurship Clubs at Kenan-Flagler Business School.

Currently at UNC, Jonathan has received numerous honors. Most highly is his position as the Vice President of the Omega chapter of Alpha Epsilon Pi, North America’s largest Jewish Fraternity. Along with this leadership position, he has been nominated for many achievements, including the National Society of Collegiate Scholars, the Leadership Advantage Program, the National Society of Leadership and Success, along with being on UNC’s Dean’s List for multiple semesters.

Now residing in Chapel Hill, he hopes to use his articles as an outlet for further business and financial knowledge, along with connecting to his readers with his youthful perspective. In his free time, he enjoys watching all types of films, playing with his dog Hutch (a chow mix), and spending time with family and friends.
Jonathan Boral

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