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A Credit Bureau, also known as a Credit Reporting
Agency or Consumer Reporting Agency, functions as
a central repository of credit and collection
records, payment history and certain legal
information on consumers and businesses. These
records are sold to credit grantors and lenders
whenever a consumer or business applies for
credit. The three major U.S.
credit bureaus are
Equifax,
Experian and TransUnion. A fourth credit bureau, Dun and Bradstreet Corp.,
specializes in reporting business credit
information exclusively.
Local credit bureaus first appeared in the United
States around 1860 and were primarily designed to
provide local merchants with a way to keep tabs on
local citizens who traded in the merchant’s
immediate community. Credit bureaus began to
spread across the country after the end of World
War I when returning soldiers began looking for
money to buy homes, automobiles and consumer
goods.
As credit purchases began to replace cash as the
primary currency for the purchase of big-ticket
items, and the nation became more mobile, the need
for national credit bureaus became apparent.
Today’s credit bureaus store over 1 billion
consumer and business records, and almost 2
billion individual credit transactions are entered
into those records every month. With all of this
activity there is always a chance that a credit
record may contain errors. That’s why the U.S.
Government passed the
Fair Credit Reporting Act (FCRA) and the Fair
and Accurate Credit Transactions Act of 2003 (FACTA).
Both of these acts set out requirements for credit
bureaus to maintain fair and accurate records,
provide a way for consumers to view those records,
and respond to consumer complaints of inaccuracies
should they exist.
The introduction of the Internet, and the World
Wide Web in particular, gave lenders a new and
profitable way to make credit-based lending
decisions on-line and “instantly”. This made it
possible for
charge card issuers and lenders to offer
credit to consumers who were willing to fill out
credit applications online. Key information from
the application, including the applicant’s full
name, address, Social Security Number and date of
birth is transmitted over the Internet to the
lender’s particular credit bureau. The credit
bureau’s computers look up the consumer's record
and calculate a
credit score based upon certain financial
criteria. If the score is above the lender’s
minimum threshold, the application is instantly
approved and both the lender and the borrower are
notified.
Under Federal law, all U.S. residents are entitled
to one free copy of their
credit report annually, from each of the three
major credit bureaus, without any cost or
obligation. Visit AnnualCreditReport.com for
details.
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