Here are steps you can take to establish your independence after financial abuse and help ensure long-term financial health.
What is a credit bureau?
A credit bureau tracks the credit history of borrowers in order to generate credit reports and credit scores. Financial companies buy this information to help them determine the credit risk of their customers and make decisions about extending them credit. The leading U.S. credit bureaus include Fair Isaac Corp. (FICO), Equifax, Experian, and TransUnion.
Credit bureaus research the credit history and behavior of borrowers. They collect both credit-related and non-credit data from financial institutions, banks, credit card companies, and even utilities and phone companies. The data collected include:
- Repayment history.
- Amount of credit available and in use, which is called utilization.
- Length of credit history.
- Types of credit accounts.
- Number of credit inquiries.
- Records of bankruptcy, foreclosures, tax liens, or repossessions.
- Outstanding debts in collection.
Credit bureaus also collect basic facts about potential creditors, such as address, employment history, and salary history. However, this information does not factor into credit scores.
Banks, credit card companies, and other lenders use information gathered from credit bureaus to determine the creditworthiness of their customers and to decide which products to offer them. For example, a credit card company may offer a balance transfer credit card to someone who carries high credit card balances.
Borrowers are entitled to view their credit reports from each of the major credit bureaus once every 12 months free of charge. They must pay to access their credit history and credit score information more regularly. There are many fee-based services that will keep tabs on credit history and credit score developments.
Potential employers, landlords, insurance companies and a host of other agencies use information gathered by credit bureaus to help determine if they want to conduct business with an individual.
Information reflected in a credit report from different bureaus can vary slightly. Some accounts listed by one bureau may be missing entirely from another. It also is possible for the reports to be incorrect. Consumers have a right to dispute any data that appears on a credit report. Financial experts recommend checking the information gathered by the credit bureaus on a regular basis.
Get your free credit report and score from myBankrate today. Want a better credit score? Pay down your debt. Use our calculator to figure out your debt-to-income ratio, then plan your payoff strategy.
Credit bureau example
Fair Issac Corp. maintains FICO credit scores, while VantageScore Solutions, a joint venture between TransUnion, Experian, and Equifax, maintains VantageScore credit scores. Both scoring methods range from excellent to very poor:
- Excellent: FICO = 800-850; VantageScore = 750-850
- Very good: FICO = 740-799
- Good: FICO = 670-739; VantageScore = 700-749
- Fair: FICO = 580-669; VantageScore = 650-699
- Poor: VantageScore = 550-649
- Very poor: FICO = 300-579; VantageScore = 300-549