A credit score is the first thing that every credit lending institution considers while evaluating any loan application.
The credit score is a comprehensive compilation of the applicant’s credit history, financial track record, and income. The bank gets all this critical information from Credit Bureaus.
In this article, we will tell you what a Credit Bureau is and discuss the three main Credit Bureaus that banks and financial institutions rely upon.
A Credit Bureau
A Credit Bureau is an institution that collects, processes, analyzes, and compiles huge amounts of credit data. This data is used by lenders to determine the credit risk associated with each perspective loan, and whether or not to approve a loan application.
But how does a bureau get access to this data in the first place? Well, the answer to this question is fascinating. Financial institutions like banks, creditors, retailers, and landlords first send the credit information of their customers to these bureaus.
The bureaus can then access the data and release their findings back to the bank.
The Big 3
There are 3 main Credit Bureaus that disseminate consumer credit data to financial institutions around the world.
Equifax, which started back in 1899, is arguably the number one Credit Bureau in the world. The company operates in more than 24 countries and maintains credit information from billions of people.
Equifax not only sells credit reports and scores to the institutions, but it also offers services like credit fraud protection and identity theft protection.
Equifax’s reputation as a credit bureau took a major hit in 2017, when its databases were hacked. Critical personal information of more than 147 million people was leaked. Equifax has now drastically improved its security systems and even offered compensatory services to those who were affected.
Experian is another leading Credit Beaurau for many banks and financial institutions across the world. The company started taking shape when businessmen from London began sharing the information of people who defaulted on their bills.
Soon later, this practice grew into the Manchester Guardian Society which then evolved into the global organization we know today.
Apart from its services to the banks and financial institutions, Experian also has some really useful subscription-based services for prospective borrowers. These services include a real-time credit tracker and on-demand credit report for $19.99 per month.
Please note that Experian’s credit reports are based on the world-known FICO credit calculation formula.
TransUnion is not as old as Equifax and Experian, but it has shown remarkable growth amongst the 3 main Credit Bureaus in the world.
TransUnion began as a holding company for a third party in 1968. By the year 1988, the company had complete information and credit data on every adult US citizen active in the market. Today, Transunion Credit Bureau maintains a database of more than 1 billion consumers from about 30 countries across the world.
Just like Experian, TransUnion offers a specialized credit monitoring service for consumers. It is a subscription-based service for which you have to pay $24.95 per month. Additionally, if you fear that your credit information might be stolen, you can freeze your data and TransUnion credit report.
The world of credit information is ruled by these 3 main Credit Bureaus. While there are many others available, Experian, TransUnion, and Equifax are widely used around the world.
While your lenders access information from them to determine your credit score, you can make the most of their on-demand services that are available to consumers.
Moreover, awareness about credit bureaus and their significance will certainly help you in your loan application process.