What is a credit bureau?
[kred-it byoor-oh] n. Private company that collects information about consumers from banks, creditors, and legal records in order to create a consumer credit report for use by lenders and other financial institutions.
Decades ago, banks and other lenders had to base lending decisions on personal interviews with prospective borrowers or on their past history with the borrower. This made for a difficult, inefficient, and unreliable method of estimating credit risk.
In an effort to gather more information about consumers that could be used to calculate credit risk, banks began working with other creditors to create consumer credit reports that contained information about a person's credit use from multiple sources. Over time, this task of managing credit reports was outsourced to third party credit bureaus that would then provide consumer credit reports to the banks in exchange for a fee.
Today, what was a large number of credit bureaus spread across the country has, through the process of mergers and acquisitions, been reduced to the three primary credit bureaus: Equifax, Experian, and TransUnion.
Making sure the credit bureaus get it right
Credit bureaus perform the daunting task of collecting information about each of over two hundred million adults in the U.S. who use credit. The process for doing this, however, is not a perfect one. Whether because of human error, identity theft, or the rigid nature of the credit reporting system, the credit bureaus store information on the credit reports of millions of people that is inaccurate, misleading, or biased.
Fortunately, consumers have the right to dispute these questionable negative items with the credit bureaus in an effort to get them removed from their credit reports. Lexington Law's credit repair services have helped clients remove millions of these questionable credit listings.