In order to fully understand credit and the reporting process, we must first understand who the credit bureaus are. Hopefully we can help you with this article to understand the history of “The Big 3”: the most commonly used credit bureaus or consumer reporting agencies and their role in the credit reporting process.
A credit bureau is essentially an aggregator of information on consumers. Each and every time you fill out a credit application, miss or make a payment, and obtain a mortgage or a car loan or just about anything that has to do with the extension of credit (some one else’s money), the credit bureaus are involved and more than likely aggregating or collecting that information.
The credit bureaus have made a very profitable business out of helping lenders like banks, mortgage banks, credit card companies and auto loan lenders assess “credit worthiness” or in laymen’s terms a consumers ability to pay back a loan. The credit-scoring model is a risk assessment in the form of a score. This assessment or credit score is one of the leading decision makers of interest rates and other terms of a loan. Consumers with poor or low credit scores will pay a higher annual interest rate than consumers with high credit scores.
Now that we understand the role of the Credit Bureaus lets discuss the history of “The Big 3”, for profit organizations which possess no government affiliation: Experian, Equifax and Transunion.
The Big 3 Credit Bureaus or Consumer Reporting Agencies
There are many smaller credit bureaus but the vast majority of lenders today use one or more of the "Big Three" credit bureaus.
Founded and currently based in Atlanta, Georgia, Equifax is the oldest of the three; Founded in 1899 as Retail Credit Company, Equifax now gathers and maintains information on over 400 million consumers worldwide.
Retail Credit Company attracted criticism in the 60’s and 70’s due to the ease of which they shared consumers’ personal information it had collected sometimes about every phase of a person’s life including finances, marital troubles, jobs, sex life, political activities and rumors.
In 1970 Equifax was indirectly responsible for the Fair Credit Reporting Act, giving consumers rights in regards to information stored about them, which was enacted via hearings held by US Congress, when Equifax moved to computerize their records allowing for a much broader accessibility of the personal information it held. In 1975 Retail Credit Company changed its name to Equifax to allegedly improve its image.
In 1968 TransUnion Tank Car, a railroad leasing organization formed TranUnion as a holding company. A year later Transunion obtained the Credit Bureau of Cook County and began its immersion into the credit reporting industry. TransUnion continued to acquire smaller regional and major city credit bureaus, which had existing contracts with local retailers.
During the 70’s in Nottingham, England a company, GUS, with an extensive list of customers buying goods on credit decided to employ a computer programmer to create a central database to integrate data from several of their businesses. A central database was created which they later added county court judgments as well. This database was commercialized in 1980 under the name Commercial Credit Nottingham.
In 1996 GUS acquired Experian, a US credit reporting business formerly known as TRW Information Services and merged it into CCN or Commercial Credit Nottingham and moved into the US credit reporting business.
WHO ARE THEY GOVERNED BY?
There are two government bodies that share responsibility for the oversight of credit bureaus as well as companies that furnish data to them. The FTC or Federal Trade Commission oversees the consumer credit bureaus and the Office of the Comptroller of the Currency, or OCC, regulates and supervises national banks with regard to data they furnish to the credit bureaus.
To solve your credit repair problems, you have to be willing to ask the tough questions. While it may feel intimidating at first, the deeper you delve into the answers, the more empowered you'll feel take action.
Are You Checking Your Credit Reports?
If you want to improve your credit, monitoring your credit reports is imperative. This is the only way of knowing what negative listings are dragging down your score. Then, and only then, can you take steps aimed either having these listings removed, or adding positive credit to offset the negative. For the free credit reports your are entitled to once a year -- from all three major credit reporting bureaus -- go to AnnualCreditReport.com.
Are You Aware of the Statute of Limitations on Debt in Your State?
Once debt reaches its statute of limitations, you are no longer legally responsible for it. While it should automatically fall off of your credit reports once it reaches the statute of limitations, this is not always the case. Research the statutes in your state and make note of when each type of debt you have should disappear from your credit reports.
Do You Know How Much Debt Your Are In?
Many people avoid keeping track of their debt for fear of a number that may seem insurmountable. But unless you do the math, you're either underestimating or overestimating what you owe, and both come with unwanted consequences. If you underestimate what you owe, you're more likely to take on new debt that only makes the problem worse. If you overestimate what you owe, you're likely to ignore it completely, certain it's too great a mountain to scale. Only by knowing precisely what you owe from month to month can you make a practical, effective plan for dealing with it.
Do You Know How Much Credit is Available to You?
Knowing your available credit is the only way of making sure you don't exceed the recommended credit utilization ratio of 30 percent. For instance, if you have $1,000 of available credit, you don't want your balance to exceed $300.
Are You Making Payments Before the Due Date?
If you plan accordingly, you can use your credit cards without carrying a balance (i.e., paying interest fees).
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Are You Paying Off Your Balances?
Ideally, you want to pay off your credit card balances every month. This means only charging as much to the cards as you know you will have cash on hand to cover before your due date. If circumstances prevent you from doing so, at the very least make more than your minimum payment every month so that you can be making some sort of debt in the balance.
Do You Have a Good Mix of Credit Accounts?
The more varied your lines of credit, the better your credit score. In fact, 10 percent of your score depends on it. For instance, a home loan, auto loan, and credit card loans are a good mix of things. That said, if you're already struggling to make ends meet with your current debt load, pay that off before applying for any new credit accounts.
Do You Know Your Credit Score?
Unlike credit reports, you are not entitled to a free credit score. However, it's well worth the cost of paying for your credit score at least once a year. This way you can get a feel for how your credit repair efforts are affecting your score, and you can make informed decisions about whether or not to apply for new credit depending on whether your score is excellent, good, fair, or poor.