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Some people know all about credit reports and the credit reporting bureaus, while others are clueless when it comes to credit. If you are one of those people that need a little education on credit reporting and the bureaus, don’t feel bad because you are definitely not the only one. When you need to purchase something, such as a car or a house, having good credit can help you receive a better price and loan terms. First of all, we should go over what credit is.
A person gains credit when they open a loan or a line of credit from a bank or other lender. A person’s credit score is the rating that the three credit reporting bureaus give to show their creditworthiness to potential lenders. Every person in the United States with a social security number has a credit score; even those with no credit show a score of zero.
The higher the score means that the person has higher creditworthiness. A low score means that the person has defaulted on past loans, and no score at all means the person has not had a loan at all yet. In order to receive credit with a low or no credit, they must either give some kind of collateral to the lender, have a co-signer, or secure the loan with money upfront. For instance, many young adults have their parents co-sign for them to make their first large purchase.
Three Credit Reporting Bureaus
Equifax, Experian, and TransUnion are the three bureaus that monitor and update each person’s credit scores. All three companies operate worldwide and have their own criteria for determining the credit scores that affect people’s financial lives. The main difference between the three credit bureaus is that they all report and update differently. For example, one bureau may keep financial records for an extended period of time than another bureau.
Equifax
Equifax uses data, analytics, and technology to determine each person’s credit score. With knowledge-based progression, this company helps people and businesses locate and seize available opportunities. In addition, Equifax operates or invests in many countries globally, which gives people even more opportunities. Helping people to make better, more informed decisions is what drives this company.
Experian
Experian reports each financial transaction with a lien. They determine a specific credit score for everyone by collecting, analyzing, and processing data. All employees of this company strive to link consumers and businesses with opportunities they wish to pursue. These connections allow each person to thrive and achieve their goals while the bank earns money through interest payments.
TransUnion
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The third credit reporting bureau, TransUnion, collects credit and public information on each person. They use this information to give banks and lenders a picture of a loan applicant in financial and social terms. The company’s employees pride themselves in helping people to find the best financial opportunities for them, based on this information. TransUnion calls this data “Information for Good®.”
The three credit scores are usually very similar, only differing by a few numbers. If you pay your debt back without problems, your good financial behavior will reflect on your credit report and your credit score. Consumers can obtain a loan for pretty much anything they want or need with a good credit score. In addition, a higher score means you’ll be able to get better rates and other loan terms.
After looking at the scores from these credit bureaus, the bank or lender that is considering lending to the applicant will determine the interest rates and other terms they are willing to offer. The bank also usually does their homework by checking additional applicant information, such as the person’s income amount and the amount of debt the person already has. At which point, the applicant and the lender must agree on the loan terms, file, and sign the paperwork.
The applicant must then pay the specified monthly payment amount to the bank throughout the period of the loan. This set amount is determined when the loan is initially discussed and includes the interest rates and any other fees the bank charges to the applicant.
We hope you found this guide to be helpful, as you can obtain a free credit report from at least one of these bureaus. Knowing this information will help you make a better decision when you need to apply for financing. You may need to obtain a loan from a bank or creditor when making a large purchase like a car or a house. A loan can help you to still get what you need without having to pay for it all upfront. At the same time, you’ll want to ensure you’re going to get a reasonable price for the item you’re looking to buy.
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