We examined credit bureaus, also known as consumer reporting agencies. These organizations are primarily nothing more than huge repositories of information about consumers. When the credit reporting bureaus receive information about any consumer from a creditor, bank, credit card company etc, whether it is positive or negative, it goes into the consumer's credit file. Whenever the credit bureaus get a request for information about an individual consumer, they compile the information in the individual's credit file into a report. This is the credit report.
The credit report is a comprehensive view of an individuals credit history, including history of paying debts. Among other information, a credit report lists any credit or debts and tells whether or not payments were received on time as agreed. Credit reports are compiled by three national credit bureaus that operate in the United States: Equifax, Experian, and TransUnion. Each of these companies independently collect data from creditors (subscribers), public records agencies, and other sources of financial information. Creditors, in turn, access the information contained in credit files from one or more of the credit bureaus when evaluating applications for credit. This information is compiled into the consumer credit report and that report is used to determine character.
Credit Bureaus are for-profit large businesses. Credit bureaus sell information to banks and others seeking to extend credit or use credit history to determine character (employment, renting). Primarily the Fair Credit Reporting Act (FCRA) regulates credit reporting bureaus. This act sets forth guidelines and consumer protection laws.
There are also companies that deal strictly with information pertaining to bank accounts and bank transactions. These companies supply personal information to third parties: banks when you open an account and merchants that accept checks. These companies are defined as reporting agencies and subject to the same regulations as the other credit reporting bureaus. The most common are:
- ChexSystems
- Check Rite
- Equifax-Telecredit
- NPC
- Tele-Check
The benefit of credit bureaus and other consumer reporting agencies, is that lenders have a standardized source to measure the risks before granting a loan or otherwise extending trust. In fact, without credit reporting it is doubtful our economy could function under its current development.
The problem is that the information contained in the credit report is never checked for validity. If incorrect information is entered, it is assumed to be correct until the credit reporting agency is told by the consumer that it is incorrect. Only at this point, will they take steps to verify its validity. Even if the information is technically correct and is verifiable the reporting does not take into consideration the circumstances that led to the derogatory information such as mistake or inadvertence by the creditor or debtor. Situations such as medical or family emergencies, loss of job, bank error, are ignored and can result in damaged credit and poor reflection of character despite there being a reasonable explanation.
