Credit reporting agency

A credit reporting agency (also credit bureau) is a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses. It is an organization providing information on individuals borrowing and bill paying habits. This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate and other terms of a loan. Interest rates are not the same for everyone, but instead can be based on risk-based pricing, a form of price discrimination based on the different expected risks of different borrowers, as set out in their credit rating. Consumers with poor credit repayment histories or court adjudicated debt obligations like tax liens or bankruptcies will pay a higher annual interest rate than consumers who don't have these factors.

In the United States, credit reporting agencies collect and collate personal information, financial data, and other data on individuals from a variety of sources called data furnishers with which the agency has a relationship. Data furnishers are typically creditors, lenders, utilities, debt collection agencies and the courts (i.e. public records) that a consumer has had a relationship or experience with.

Data furnishers report their payment experience with the consumer to the credit reporting agency. The data provided by the data furnishers as well as collected by the agency are then aggregated into the credit agency's database. The resulting information is made available on request to customers of the credit agency for the purposes of credit assessment, credit scoring or for other purposes such as employment consideration or leasing an apartment.

Given the large number of consumer borrowers, these credit scores tend to be mechanistic. To simplify the analytical process for their customers, the different credit agencies can apply a mathematical algorithm to provide a score the customer can use to more rapidly assess the likelihood that an individual will repay a given debt given the frequency that other individuals in similar situations have defaulted.