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Definition: Credit Reporting Agency
Credit reporting agencies refer to organizations that maintain information related to credit history of individuals or businesses. They collect data from various sources, most commonly from firms providing credit such as banks, other financial institutions, credit card companies, and community credit banks etc. They also collect information from public records, such as bankruptcies.
Every time you apply for credit, the bank or credit card company calls up one or more of these credit reporting agencies to review your credit report and credit score. The lending institution takes a decision based on the information that the credit reporting agencies have found out from public data.
World’s powerful institutions Experian, Transunion and Equifax are known as, The Big Three perform two basic services: collecting and reporting credit information
How does credit reporting agency help?
• Lending institutions and other creditors send updated consumer credit information to one or more of the Big Three credit reporting agencies on a monthly basis. This information include their credit history as well as the timing and restructuring etc done previously
• Whenever an individual fills out an application for a credit card or a loan, all of that information is also sent to the credit reporting agencies.
• The agencies collects information from sources like public records for financial information, such as public records from bankruptcies, foreclosures etc.
• The lending institutions i.e., banks etc. that provide information to credit reporting agencies may also request for reports whenever a consumer applies for credit
• Credit information is shared only when an inquiry is made .There are two kinds of inquiries: hard and soft. Hard inquiries are requests made by institutional creditors like credit card companies and mortgage lenders and by rental applications to a landlord Soft inquiries are made by the consumer himself or by an employer.
Negative events like bankruptcies and foreclosures stay on a credit report between 7 and 10 years, while positive events, like on-time mortgage payments, can stay on even longer