Credit reports – how they are created

Credit bureaus are companies that store credit information and changes in a person’s credit information. Any company that extends credit to consumers will use information that these companies provide about a person’s credit standing that will aid them in making the decision as to whether they will approve a line of credit to someone. Credit bureaus report detailed information to any company that extends credit to you.

These reports contain details including your payment history, credit lines and more. A potential creditor can find out your complete history by seeking the information these companies store. This is done in exchange fro information on existing clients about their billing status and payment details. So, credit bureaus work hand in hand with any company that extends credit to consumers. Credit bureaus also obtain information such as bankruptcy filings that they get from public records.

The credit report itself does not rank your status. Credit bureaus basically collect and distribute information – they do not analyze or evaluate your status. The assessment is done by the company that you are requesting a line of credit with. You will find that the majority of credit providers use the same if not similar criteria for extending credit to consumers. Some companies have different requirements for extending credit. Some companies provide credit when others will not bases on certain criteria.

The credit bureaus sell credit reports services to non-reciprocating lenders as well. This means that they will sell your information to people or companies requesting it if they don’t reciprocate such as potential landlords and the like. They also sell reports to companies looking for certain demographics for marketing and solicitations.

Unless you never apply for a loan, credit card, or any other form of credit, you do not have any control over the creation of your personal credit report. There is a watchdog though. The Federal Trade Commission (FTC) posts specific laws and guidelines that regulate how your credit report can be used for or against you. This laws and rules are out into place in order to ensure that consumers such as you do not have incorrect information about them reported to others. The Fair Credit Reporting Act (created by the FTC) is in place to make certain that accuracy, fairness and privacy is in place regarding your credit report at credit bureaus.

Depending on the state you live in, there may very well be additional laws in place regarding credit reports and consumer protection.

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