Credit Bureau
A company that collects consumer credit histories and provides credit reports and scores to lenders for underwriting decisions.
What is Credit Bureau?
A credit bureau (also called a credit reporting agency) collects information about consumers' borrowing and repayment histories from lenders, public records, and other sources, and compiles this data into credit reports. In the United States, the three major credit bureaus are Equifax, Experian, and TransUnion. Lenders use credit reports and derived credit scores to evaluate applicants for credit cards, mortgages, auto loans, and other forms of credit. The Fair Credit Reporting Act (FCRA) gives consumers the right to receive a free annual credit report from each bureau, dispute inaccurate information, and know when their credit is used against them. FICO scores, the most widely used credit scores, range from 300 to 850 and are calculated from bureau data.
Example
A consumer applies for a mortgage. The lender pulls a tri-merge credit report — combining data from all three bureaus — and sees the applicant's 740 FICO score, 15-year credit history, two open credit cards with low utilization, and a $50,000 student loan on time for eight years. No negative items appear. The 740 score qualifies the applicant for the lender's best mortgage rate tier, potentially saving tens of thousands of dollars in interest over a 30-year loan.
Source: Consumer Financial Protection Bureau — Credit Reporting