Credit Report

What is a Credit Reporting System?

When you apply for credit with a loan provider, they turn to a credit bureau to obtain a copy of your “credit reputation” to help him evaluate the risks in extending credit to you. The bureau doesn't actually approve or deny your credit, but rather supplies the loan provider with your payment history as reported by other subscribers with whom you have received credit. The loan provider is counting on the credit bureau's information to serve as a filter to help separate good credit risks from poor risks

The modern credit reporting system helps credit grantors approve loans and credit in minutes. Credit reporting also allows banks to issue credit cards to consumers who live across the country. The system provides continuously updated information to make fast, accurate decisions dealing with almost all consumer credit transactions.

The credit reporting system is a business relationship between two parties: credit bureaus and credit providers who pay for a copy of this credit information on an as-needed basis. Credit bureaus refer to these merchants who pay a fee for their service as subscribers.

Consumers with a credit record reflecting prompt payment find it comparatively easy to open new or expanded credit lines. Businesses know they can rely on TransUnion data to make sound judgments about credit.

Advantages of the credit reporting system

The credit reporting system:

• Opens new opportunities to obtain credit
• Keeps credit costs low
• Speeds credit decisions
• Makes our modern credit-based economy possible

Why do we need credit reporting?

Credit reporting is needed because it provides the information that helps consumers make purchases and secure loans. Credit reporting makes it possible for stores to accept your checks, banks to offer credit and debit cards, businesses to market products, and corporations to better manage their operations.

It is important for you to review your credit report at least once a year to reduce the element of surprise, and to keep you informed of the current status of your credit worthiness.

Why do lenders use credit scores?

Credit scores provide a valuable guide to future risk based solely on credit report data. The higher the consumer's score the lower the risk to lenders when extending new credit to a consumer.