A Credit Bureau, also known as a Credit Reporting Agency (CRA), is a private company that collects and compiles credit data, and maintains and stores credit history and payment behavior on consumers and businesses.
CRAs collect credit data from banks, credit card companies, lenders, and other public sources, and compile this information for the purposes of creating credit reports and credit scores for consumers and businesses.
Banks, credit card companies, and lenders, also known as creditors, become paying members of one or more CRAs, and this gives the creditor access to a credit applicant’s credit report, which reveals how a credit applicant has paid their creditors in the past and also reveals how the credit applicant is paying their current credit obligations.
It is important to understand that the Credit Reporting Agency (or the Credit Bureau) DOES NOT decline or approve your application for credit.
The CRA is solely responsible to collect and compile the credit information that is provided to them by the banks, credit card companies, and lenders, and to collect public records.
In other words, even though CRAs employ humans, they function as ‘robots’, meaning that, CRAs only compile what is submitted to them by the creditors and the lenders, and also, CRAs only record what is available on public records.
Regardless of whether the information collected is correct or not, the CRA records the credit information on a consumer’s credit report or a business’s credit report.
CRAs do not readily verify the validity of the information that is submitted by creditors or lenders, and CRAs do not verify the validity of the information that is collected from public records, they will only do so when they receive a valid dispute from a consumer or a business.
So, when a person or a business completes and submits an application for credit, the banks, credit card companies, and lenders, use the information on a consumers credit report, that is compiled by the CRAs, to make a determination on whether to APPROVE or to DENY a credit application, and if the credit applicant is APPROVED, the credit information will be further used to determine the interest rate to be charged.
The CRAs do have a ‘universal system’ for each bank member, credit card member, and lender, to submit credit information, and by employing a ‘universal system’, all members should be able to decipher the credit report in a quick and easy orderly fashion.
Unfortunately, we are all human, and sometimes the ‘universal system’ is not properly utilized, and this improper use of the ‘universal system’ may cause inaccurate credit data to be submitted to the CRA, and when these types of errors are submitted to the CRA, this causes the banks, the credit card companies, and the lenders, to receive and to use inaccurate, misleading, or incomplete credit information to determine the creditworthiness of a credit applicant.
The result of these credit reporting errors may cause the credit applicant to be DENIED the credit that they are applying for, or worse, the credit applicant may be APPROVED and receive a higher than deserved interest rate, costing the credit applicant thousands of dollars in interest charges throughout the months and years of the credit term.
For this very reason it is imperative for everyone to check their credit report, at the very least, once a year to verify the accuracy of their credit information, and certainly weeks, or a few months, before applying for any type of credit.
It is also important to understand that the CRAs are private companies AND NOT government agencies.
Which is to say, that there is no ‘OFFICIAL DISPUTE FORM’ for you to use to dispute errors on your credit report, however, the law does mandate that the CRAs MUST INVESTIGATE and remove any inaccurate, misleading, and incomplete information from your credit report, however, there is a ‘process’ that a consumer must follow to address these types of issues.
This ‘process’ does take TIME, so again, it is very important to check your credit report for accuracy.
Finally, CRAs CANNOT remove, on their own, any negative remarks from a credit report so long as they are accurate and verifiable.
The exceptions are only if the creditor authorizes the removal of such a negative remark, or if the CRA or the creditor cannot verify the accuracy of the negative remark, or for other reasons under the Fair Credit Reporting Act.
