HOW CREDIT REPORTING WORKS

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Whenever a customer makes an application for a loan, a charge card, or a special retailer financing deal, there is a system of checks and balances working behind the scenes that enables loan providers to make timely, educated decisions about their credit worthiness. An important part of the decision-making process includes an evaluation of the consumer’s credit history, which is usually accessed by lenders in the kind of a credit history. The credit score is a numerical representation of the information consisted of in a consumer’s credit report. For instance, were existing accounts paid on time; for the number of other loans or charge card did the customer just recently use; how high are the balances on credit cards in contrast to the credit limits on those cards.

Any consumer who has used a charge card, or gotten a loan to purchase an automobile or a home, is most likely to have a credit report on file with each of the three nationwide customer reporting agencies (CRA): Experian, Equifax and TransUnion. As soon as every 30 days, info about a customer’s continuous credit activity is communicated directly by their lenders to the 3 nationwide consumer reporting firms independently. The customer reporting companies receive, assemble, and preserve the history offered by the creditors and lending institutions. As the information in a consumer’s credit report is being upgraded continuously, their credit score changes together with it. It is important to keep in mind that a customer’s reports and scores are most likely to vary with each CRA given that not every lending institution reports info to all three major agencies at all times.

The CRAs do not make decisions on whether a consumer receives a loan or credit card. Those choices are made straight by lenders. When a lender is evaluating a customer’s eligibility for a loan or credit, they access one or more of these reports and the matching credit history to examine the consumer’s credit report. Usually, loan providers score consumers based upon a series of 300 to 850, with ratings of 750 and above getting the most favorable loan rates and terms.

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