Understanding your credit bureau
A credit bureau (sometimes referred to as a consumer credit reporting agency) is a company that collects and compiles information regarding your credit history from banks, other financial institutions, and various other bodies such as courthouses and the Office of the Superintendent of Bankruptcy. There are two major consumer credit bureaus in Canada — Equifax and TransUnion — that compile this information in the form of a credit report and provide it to banks and other lenders as one of the ways to help assess your creditworthiness. Let’s take a closer look at how credit bureaus work.
Do the two major credit bureaus make lending decisions?
A frequent misperception about the two major credit bureaus is that they make lending decisions. While credit bureaus collect credit information from creditors and lenders that you have accounts with in order to make it available to certain third parties in the form of a credit report, the decision to deny or approve someone for a credit request ultimately lies with the lender or creditor. Each lender and creditor may have its own criteria for denying or approving credit requests.
Where do credit bureaus get their information?
Credit bureaus have different sources for collecting information, and not all creditors and lenders report to the two major credit bureaus. This means that each of your credit reports may contain different information. Creditors keep the credit bureaus updated with your account status and payment history — two factors that contribute to your credit scores.
Speaking of credit scores, there are many different credit scoring models used by credit bureaus and other entities. As a result, your credit score may vary between the major credit bureaus — even if all of your creditors report to both credit bureaus.
In addition, while many creditors report to both major credit bureaus, some creditors may report to only one or none at all.
What type of information gets reported and how is it used?
Credit bureaus collect the following types of information:
- Personal information, such as your name and address
- Credit account information, also known as “tradelines”
- Inquiry information
- Public record and collections information
It’s important to note that some companies may take these factors and others into consideration when evaluating your application for credit.
Most people are aware that banks and credit card companies leverage information provided by credit bureaus to make certain types of lending decisions about you. But, other companies with permissible purpose can also pull a copy of your credit report.
Credit bureaus can also provide information to banks and insurance companies to help these companies identify consumers who can potentially take advantage of specific products. This is part of how pre-approved credit card and mortgage refinance offers work.
In the early stages of the mortgage pre-approval process we will access you credit bureau, with your written permission, and we will review the details together. Understanding your credit bureau is important! Let us help!
Article sourced from Equifax (www.equifax.com)
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