What is acredit bureau?
A credit bureau is a company that gathers credit information on individuals and sells it. It can be sold to consumers, lenders, investors and creditors who use it to inform financial decisions, such as granting loans or making an investment.
Where have you heard about credit bureaus?
Experian, Equifax and TransUnion are some of the most widely known credit bureaus in the UK and US. You may have come across one of these when applying for a loan product such as a credit card.
Before approving a borrower’s application lenders will typically engage a credit bureau to run a credit check, to learn the borrowers’ credit score and assess the default risk. This determines how likely it is for a borrower to default on the loan.
What you need to know about credit bureaus…
Credit bureaus collect information from banks and other businesses including credit history, which contains details of previous loans and their repayment. They also look at the amount of credit being used in relation to what’s available to the borrower, while reviewing public records for bankruptcy and repossession.
In addition to providing credit information, personal details such as address and employment histories are also held. That’s why employers and landlords can use credit bureaus to verify personal information.