Do you lend someone money without considering his ability/records to repay the debt? Absolutely not. If you ever did so, let me tell you that you really risked your cash. But the banks, companies, insurance companies and landlords are more conscious about their money when they take the same risk (probably with bigger sum of money) when providing loans to people for financing cars, purchasing house or paying for the education. Therefore, they meticulously examine the financial history of every borrower.
Though there are many credit rating agencies (CRAs), more than 90% of lenders consider the credit reports by big three – Experian, TransUnion and Equifax. They collect your financial information from banks, credit card companies, companies and other lenders to prepare a credit report which assigns you a three digits credit score. According to Fair Credit Reporting Act, 1971, consumers in the United States have free access to their credit reports once a year from all the three credit bureaus. These three are the fierce competitors and they never share any information with each other.
Let’s get into details of how each one of them works.
Experian
It is Ireland-based credit bureau with strong foothold in 36 countries. It was founded in Nottingham as CCN Systems in 1980. Experian has two divisions – personal credit and business credit. All the lending institutions and other creditors send a monthly report about every individual consumer to Experian. It also scours every possible public record, payment history, bankruptcy, foreclosure, etc.
Experian database maintains credit information of 220 million Americans. In June 2010, it purchased RentBureau and merged its rental payment records of 7 million US people with Experian US consumer credit.
Though the Fair Credit Reporting Act, 1971 has entitled consumers to receive their credit report once a year without any fee, Experian leaves no stone unturned to promote FreeCreditReport. com, its for-profit credit reporting arm.
Equifax
Equifax is an international credit information supplier headquartered in Atlanta, Georgia. It is the oldest of the top three credit bureaus and has information about a large number of credit holders – 400 million people around the world.
It was earlier known as Retail Credit Company, which had every information about people including facts, jobs, financial status, sex life, marital troubles, childhood, political activities and almost every phase of an individual’s life. Retail Credit Company was heavily criticized for openly selling the personal information of people to anyone for money. It was due to the misdeeds of Retail Credit Company that US Congress decided to enact Fair Credit Reporting Act in 1971. Then, the RCC changed its name to Equifax in 1975 in a hope to improve its public image.
Equifax, like Experian, operates in personal as well as business credit. Since both the divisions are independent of each other, there is no possibility of cross-referencing between your personal and business credit profile. It sells consumer credit, insurance reports, business credit reports, software and analytics to a wide range of buyers.
TransUnion
TransUnion is one of the top three credit bureaus in the United States. It was established in 1968 and today the company has 250 offices globally with headquarters in Chicago, Illinois. In July 2011, TransUnion filed an Initial Public Offering to raise $325 million to expand its operations.
It has strong capabilities in fraud management, preventing identity theft, collections management and risk management. TransUnion directly sells consumer credit information.
In 2003, TransUnion had to pay $5.3 million to Judy Thomas, a resident of Oregon, in a suit that it took her six years to get an erroneous credit report corrected.
These agencies set a benchmark of credit reporting and over 90% of all the American creditors use their reports to make important decisions. If you notice any error on your credit report, contact them in a friendly manner, screaming through mobile phone may result into your account being flagged. They are also concerned about correct reporting because that’s their only way to maintain trust of creditors.
How Do They Earn Revenues?
Credit bureaus compile consumer information and sell it to potential creditors. The lenders use this information to make decisions whether or not to lend you money based on your past financial records.
When these greedy agencies were not satisfied by selling your private information to just lenders, they wanted to expand their client base. They targeted potential employers. Now the credit bureaus began to earn money not only when you seek loan or credit cards, but also every time you apply for a job. The employers now purchase credit records of every job applicant.
The credit reporting agencies are private corporations. In order to please their shareholders and entice the investors, they need to increase revenues every year and earn more profits. So these agencies went to property management firms to woo them, now when you need to rent an apartment, the landlord will check your credit score.
The credit bureaus realized that they can fetch more cash by making credit report necessary in every aspect of people’s life. Hence, they went on to negotiating with the auto insurers to make credit reports necessary in auto insurance. Now the insurance premiums are not decided by how perfect and clean your driving record is, it has all become a game of credit score. The insurance companies pay credit bureaus to obtain your credit record, and charge you higher premium if your credit score happens to be low, no matter you are the safest driver in the world! It’s a win-win for both giants – the credit bureau and insurance company.
That’s not all. These firms also earn revenues by selling your personal information to solicitors who, by using this, send you different spammy offers. In short, credit reporting agencies earn revenues by selling your personal and financial information, no matter who the buyer is. Many times in the past all the three agencies have been dragged to court and fined heavily for selling the credit report to people instead of giving them free access to their credit report.
Empower – Educate – Take Action
H & I Credit Solutions
Related posts:
