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How Credit Reporting Agencies Work

As credit increased throughout the country, there arose a great need to issue reports concerning those who are not a good credit risk as well as those who are credit worthy. Because of this great need, credit-reporting agencies were formed several years ago. These agencies, known as credit bureaus, receive information about consumers from banks, loan companies, credit card companies, department stores, as well as from other credit and lending sources. Credit bureaus earn their profits by giving a computer printout showing a financial and credit profile of any individual. These reports are requested by a lender or a credit-issuing firm from which you have requested credit.

Lenders will base their acceptance or rejection of your application for credit based on the information about you in your personal credit report. If your credit report shows that you have been reliable in the past, then in most cases credit will be granted. What if your report shows that you have not been reliable in the past? Perhaps you have been like others in this country that have encountered circumstances beyond your control, which made it impossible for you to meet your credit obligations. What if your credit report shows that you defaulted on a particular account or were constantly late making payments. This of course can be most embarrassing, and usually leads to credit denial.

There are over 2,500 credit reporting agencies in the United States. These agencies sell information about you to banks, department stores, credit card companies, loan companies, etc.

These credit bureaus keep on file information concerning you and your credit, but they do not make any final judgments as to your credit worthiness. The decision is up to the lender, which you have dealt with to decide and report to the credit bureau.