Definition
A credit bureau or credit reporting agency (CRA) is a company that collects, maintains and sells credit information to anyone with a permissible purpose.
Analysis
Credit bureaus are responsible for collecting credit information that is reported by creditors. This information is compiled into individual credit reports that represent individual consumers.
The credit bureau charges fees to creditors that submit information, and they charge fees for the release of such information. The information released is generally sent as an individual credit report with a credit score to indicate the individual’s creditworthiness.
Credit bureaus have several types of credit reports and credit scores that they sell to lenders. They also have an alternate version that they sell to individuals.
The credit reports that one credit bureau releases are essentially the same for each individual, whether it is for sale to the individual or to an entity with a permissible purpose to view the report. The scores, however are different, as they are based on different risk scoring models.
Some risk scoring models are proprietary to each credit bureau. Some are based on formulas developed by Fair Isaac Corporation. Additionally, the three main credit bureaus have recently collaborated on a joint scoring model known as VantageScore.
There are many credit bureaus that operate and compete for business from creditors and from consumers. The three main credit bureaus are:
Additionally, there are some credit bureaus that specialize in alternative or non-traditional forms of credit. Some of the more well known alternative credit bureaus are:
- PRBC (Payment Reporting Builds Credit)
- First American Corporation (Anthem Score)
- eFunds
Alternative credit bureaus arose to specifically target the estimated 50 million unscorables who are left out of traditional credit scoring. This is in response to a Fair Isaac study, in which the FICO Expansion score was developed as a result.
Another credit bureau that gained prominence in 2001 is Innovis. Innovis does not provide the same services as the other credit bureaus. It does not influence lending or hiring decisions. Instead, it is used to identify fraud and help lenders target their solicitation campaigns so that consumers with delinquencies may be skipped on certain offers.
One major credit bureau provides credit reporting for businesses. Dun & Bradstreet essentially has a monopoly on business credit reporting. Some other credit bureaus offer their own versions of business credit reports, but they are not widely used. Companies generally have to pay to establish a company credit report and to verify individual credit records with their creditors.
Credit reporting is regulated by the Fair Credit Reporting Act.
