A credit bureau, also known as a "credit reporting company" or "credit reporting agency", are organizations that filter the credit information of each person (in these companies you can find your financial X-ray, that is your credit history where all your credit information appears, whether good or bad; from the first moment you had a card when you were approved for a credit if you had a debt and have not yet paid it).
That is why it is always advisable to pay all your debts and not keep any in oblivion because even if they are debts of 10 years ago, everything is registered in that offices, which is negative for you when applying for a loan or a line of credit.
EVERYTHING YOU NEED TO KNOW ABOUT CREDIT BUREAUS
- The credit bureaus are in charge of collecting and investigating all your credit information, selling that information to companies in the credit sector. The purpose of the bureaus is to sell credit histories so that companies that provide credit cards or loans can determine with this information if you are eligible to acquire a loan and/or card at this time.
THAT'S WHY IT IS ALWAYS GOOD TO KEEP GOOD HISTORICAL CREDIT FOR FUTURE CREDITS.
- The three main credit bureaus are Experian, Equifax, and TransUnion, they are not the only ones, but they are the most popular agencies in the United States.
- Credit reporting companies assign each person a credit score known as a SCORE based on their credit history. That is, if you have a low score, it is because there are negative aspects of the account within your credit history; it is not advisable to have negative accounts as they are reflected in your credit history.
- It is very important to have a good score as it depends on whether you qualify for a loan or not.
- Credit agencies do not determine if you are a creditor or not, they are only companies that collect all your credit information, whether good or bad; they are in charge of selling all your information to companies that provide credit cards or loans.
HOW THE CREDIT BUREAUS WORK
The credit bureaus are affiliated with all companies or credit institutions, to help all entities that provide all types of credits, especially to give correct information to these entities, so that, when making a loan or credit card, they have all the customer information to make the right decision. The credit report is given to all credit companies. The companies are the ones that decide whether to make the loan or not since they must evaluate if the creditor of the loan is a trusted person, especially if they are going to maintain a good payment history.
The credit bureaus are not responsible for deciding who is eligible to be a creditor; they are in charge of collecting all credit information, having a credit report where all your history appears, providing negative and positive information; these factors take into account the entities to validate a credit, it depends on the credit history, the fees and interests to be paid.
HOW DOES A GOOD CREDIT SCORE HELP YOU?
The credit bureaus have credit information of all the people, they can be creditors of great credit, people with debts with more than 15 years, among others; these bureaus collect all of the people's credit information and then sell it.
Most people collect information on credit accounts, however, it is not their only function, since there are offices that also access more complete information, including payment history, phone bills, apartment rentals, utilities, and more. Credit bureaus when analyzing credit history evaluate what score to put. Therefore, if you have negative scores on your credit report, your score will be low; with this, you will have a high-interest rate and little probability of accessing a loan; the opposite is true with positive account history.
To access credit, you must have a good FICO score; (it is a credit score, used by credit institutions, where they evaluate the credit risk that the person who is requesting the loan can bring, there they determine whether they grant the credit or not). These are the factors involved in FICO scores:
- Payment history.
- Current debt capacity.
- Types of credit used throughout your life.
- Creator of new credit accounts.
FICO points are the most accurate method for credit companies to assess people's creditworthiness when applying for a loan. These scores can range from 300 to 850 points; a good score is considered between 639 and 670 points in the credit history. This method is updated from time to time, the latest version is FICO Score 10 Suite, which was announced on January 23, 2020.
THIS INFORMATION HELPS CREDIT COMPANIES TO DETERMINE THE APPROVAL OF LOANS, DETERMINING RATES AND INTEREST RATES.