Credit bureau reports come from an industry involving establishments that are mainly occupied in providing consumer credit reporting services. These credit reporting services are the main source of credit information for consumer markets. There are numerous credit reporting agencies operating all over the world but the industry is led by three main credit bureaus. They are Equifax, Experian and TransUnion.
The credit bureau reports will offer clues that are valuable about an individual’s payment behavior. Marketers may also use these credit bureau reports and the information they provide to segment their markets based on the criteria of credit performance.
The three major credit bureaus compile data from public records and creditors to create the credit bureau reports for millions of people. All the three main bureaus maintain a contract with an independent company which is known as Fair Isaac Corporation (FICO). It transposes the public record data into a credit score. The credit scores range from 350 to 800 points with a good score being considered as 620 or above. About six years back, VantageScore was launched to compete with FICO’s score. The VantageScore scale ranges from 501 to 990 with a good score being considered as 700 or above.
Structure of the Credit Bureau Reports
Most credit bureaus are either owned by or under a contract agreement with the three main consumer credit reporting agencies of Equifax, Experian and TransUnion. These agencies maintain a centralized computer database that contains the credit reports of millions of people. These bureaus generate more than a half billion credit bureau reports each year with information on consumer trade activities.
Consumer and mercantile credit are the two main categories of services provided by the credit reporting agencies. Consumer credit is the medium of exchange that an individual offers to a seller of services or to the lending institutions. The individuals use this credit to get items or services and pay for them at a future date. The credit bureau reports of the credit reporting services will offer information on cash, retail and service credit.
These services gather data on a consumer’s credit activities and based on this information, agencies will offer a consumer’s credit rating to the financial institutions or money lenders seeking credit information.
Consumer Credit Bureau Reports
Retail credit is pursued before processing of retail sales to individual consumers. The sale will take place as an open charge transaction or either a revolving/installment credit. Credit reporting services will give information on each individual that applies for retail credit cards like American Express, Visa or MasterCard. These credit reporting agencies are also used to check the credit status of people applying for mortgage.
Many retail companies which offer installment credit also utilize these credit bureau reports in a similar credit-check style. Organizations like consumer finance companies, small loan companies, commercial or industrial banks, credit unions and insurance companies depend on the credit bureau reports of the credit reporting establishments. These organizations will seek advice from these credit bureaus before sanctioning the loans to the consumers.
Mercantile Credit Bureau Reports
Business credit is one of the main ways by which business managers can convert opportunities into result oriented projects. The credit reporting establishments offer both commercial and cash credit data to the organizations requiring business credit information.
Commercial credit is given, for example, when a manufacturer supplies goods to a wholesaler for resale to the consumer. Credit bureau reports are extensively used in this area mainly because of the volume and the value of goods that are exchanged. Credit bureau reports are used to give information in the form of credit rating, contributing to the eventual final evaluation of credit.
Cash credit will allow companies to borrow cash to build up both current and fixed assets with an agreement of repayment on a short, intermediate or long term basis. Credit bureaus maintain control of the information that they collect. The credit bureaus have to check on the identity of all who request credit information in order to comply with the Fair Credit Reporting Act.
The information needed to create credit bureau reports is taken from a variety of sources located in the trading areas that are willing to exchange such information. The bureaus get the ledger information from credit grantors and verify employment with employers. They collect credit related public records from courthouses. The users of credit bureau reports are also interested in the historical status of individual consumers in terms of their payment habits and schedules.