Credit-reporting services, also called credit bureaus, are firms that maintain credit-history information on consumers and businesses. Credit-reporting services collect data about Americans’ bill-paying practices and publicrecord information such as tax liens, court judgments, and bankruptcies. In the United States there are three major credit-reporting companies: Trans Union, Equifax, and Experian (previously named TRW). These firms own, or work with on a contractual basis, over 1,000 local and regional credit bureaus around the country, maintaining databases with credit information on more than 170 million individuals and businesses and producing over 500 million credit reports annually. Credit-reporting services are an important resource used by lending institutions in making loan decisions. A typical credit report identifies the individual or firm; provides bill-paying history with retail stores, banks, finance and mortgage companies; and includes any public record credit-related documents. Credit-reporting services do not make decisions on LOANS, but their reports are the primary basis for many lending decisions. Credit-reporting services produce credit scores based on consumers’ payment history and other credit information. Scores range from 300 to 850, with the higher score representing a lower credit risk to lenders. CREDIT SCORING has, at times, been a controversial issue, with consumer groups complaining about the use of inaccurate data. Many dubious businesses have promoted their “credit repair” services to consumers turned down for loans. The number and type of inquiries made about an individual’s credit history is an important factor. Lending firms often make promotional inquiries into credit-reporting databases, gathering mailing lists of consumers who meet their inquiry criteria. Creditors also make periodic account-management inquiries, reviewing changes in the credit status of their customers. While these two types of inquiries do not affect consumers’ credit scores, credit inquiries generated by consumers’ requests for credit affect peoples’ credit ratings. Too many inquiries suggest consumers are seeking a large amount of credit or have too much available credit. The Fair Credit Reporting Act (1971) regulates credit information, requiring credit-reporting services to
• maintain accurate, relevant, and recent information
• provide access to credit information only to bona fide users
• inform consumers who are turned down or have their interest costs raised the reasons for these decisions
• allow consumers to review their files and correct any inaccurate information