Credit Report Companies

Credit report companies provide two basic services: collecting information and reporting information. Lenders and creditors report information to these data management bureaus on a monthly basis. Information is kept in a massive database and retrieved when other lenders, creditors, employers, or other companies request it for legitimate business purposes. Businesses use these reports to evaluate an individual's financial worthiness. By reviewing a person's historical records, they can determine how if he or she will respond in the future in matters like repaying debt. If a lender concludes that the risk level is minimal, the client will be rewarded with lower interest and insurance rates. As the risk increases, so do the rates and fees.

Throughout the years, credit report companies have undergone many transitions. In the early 1800s, a businessman named Lewis Tappen believed that lending money with interest was not Biblical. "And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee." (Leviticus 25:36-37) Lewis began collecting detailed information on his customers to protect his business. His records were so impeccable, other agencies offered to pay for access to them. When Lewis hit financial hardship in the 1840s, he began selling his information to stay afloat. Within ten years, he had established a nationwide network of credit report companies.

It wasn't long before such agencies developed a bad reputation. During the first half of the twentieth century, companies only collected negative information on consumers. They did not keep records of positive items that would increase an individual's financial worthiness. Often, data was primarily personal and lifestyle-based, containing information on sexual orientation or reports of drug and alcohol abuse. Plus, any data collected was private. Consumers could not access information on themselves. But in 1971, Congress passed a new law changing the way credit report companies did business. The Fair Credit Reporting Act required agencies to provide correct information to businesses about consumers. It also gave individuals the right to access that information and see who has requested it. Consumers now had the opportunity to correct erroneous in formation on their accounts. Studies show that about 79% of reports contain mistakes. They could also restrict businesses from accessing their information and have negative information removed after 7-10 years.

There are many credit report companies in operation today. Represented by the Consumer Data Industry Association, most small agencies deal only with a specific region or industry. Some international agencies focus specifically on a country or geographic region. However, three agencies have grown to become known as the Big Three: Equifax, Experian, and TransUnion. These agencies are the largest, most popular collection and reporting organizations that are operating today. Although each bureau collects information differently and works with varying creditors and lenders, the information collected falls under the same categories. Identification information includes an individuals name, address, employment history and spouse. Reports will provide information of various accounts held by a consumer: account numbers, when each one was opened, account limits or loan amounts, and payment histories. Delinquencies reflect negatively on a consumer whereas on-time payments and account upkeep will increase financial worthiness. Credit report companies will also report on legal issues such as lawsuits, tax liens, and bankruptcies. Consumers can also get information regarding who has inquired about their information within the past twelve months. These agencies also use a mathematical formula to calculate the financial worthiness of an individual in a three-digit score. The Fair Accurate Credit Transactions Act (FACTA) allows an individual to request one free copy of his or her credit report each year. Requests from all three bureaus can be easily requested online at www.annualcreditreport.com, a secure, centralized service created specifically to make these requests more convenient for consumers.

After being in business for over 100 years, Equifax claims to have over 400 million financial holders in their database. Based in Atlanta, GA, the oldest of the credit report companies was founded as Retail Credit Company and specialized in turning personal information into a viable industry, providing services in portfolio management, fraud detection and financial information. Criticism of the personal nature of data collected led to the congressional hearings in the 1970s and the passage of the Fair Credit Reporting Act. The company changed its name in 1975 to improve its image after the legal proceedings.

Although the other two credit report companies, TransUnion and Experian, haven't existed as long, both have created an equally reputable name in the past several decades. Created as a holding company for Union Tank Car in 1968, Chicago-based TransUnion began acquiring major city bureaus and has grown to over 50,000 customers in 24 countries. The newest organization, Experian was founded in 1980 as TWR by John Peace in Nottingham under CCN services, an information services business. Now headquartered out of Dublin, Ireland, Experian has expanded to 36 countries.

All three companies provide a plethora of services from risk management and information profitability to consumer analytics and direct marketing. Although they are most known by consumers as a source for personal financial history reports, the main focus of these agencies is to resell information to credit companies that want to target campaigns to specific audience profiles. Legislation has continued to monitor and regular the industry to protect consumers. Obtaining a report from these three organizations is one of the best methods to detect identity fraud, the fastest growing crime in the United States. Today, all three provide additional services to educate and assist consumers in protecting personal and financial identity.

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