Credit Bureau

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A Credit Bureau (or consumer reporting agency) is an organization that collects various pieces of data and makes them available to lenders to aid them in their decision to offer credit or loans. The information they collect from various sources can lead to different interest rates and loan terms for the borrower and if the data is predominantly negative, they may completely reject a loan application. Generally speaking if information turns up that the borrower has had debt troubles before then their interest rate will be higher.

In order to get their information a Credit Bureau will have working relationships with the courts and their public records, various lenders, debt collection agencies and various other organizations which may have available information about a person's finances. All of this information is made available by law and a legal credit bureau will not obtain your financial information in an illegal fashion. A credit bureau may be held liable if they report a figure that is not in the public domain or is blatantly false.

The raw data is rarely given to a lender, to make it less personal and to make the process simpler. Instead a credit bureau will use various mathematical calculations to give a credit score, sometimes known as a credit rating. So instead of hoards of documents and records, the credit bureau will simply see if the person has a good credit rating or a bad credit rating and act accordingly.

A credit bureau may not just provide information to traditional lenders but also businesses such as car dealerships or other business that may offer credit terms on their sales. For example a lot of cars are sold on finance, so it would be in their best interest to get a credit rating on their customer.

Ironically if there is barely any information available about a person's credit, then that can sometimes have an even more negative affect than somebody with medium to poor rating. Using a credit card responsibly is a good way to raise your credit profile. It's actually better than not using one at all.