What do credit reporting agencies do and how does it impact you?
You know that having good credit is important and that there are agencies that report on your credit history, but do you know what credit reporting agencies actually do? How does what they do impact you? Learn more about credit reporting agencies and how to use them to improve your credit score.
What are credit reporting agencies?
There are three major credit reporting agencies in the United States: TransUnion, Experian and Equifax. They are also known as credit bureaus. These are for-profit companies that collect data about millions of Americans’ credit usage. They are not affiliated with the government, but the Federal Trade Commission (FTC) and the Office of the Comptroller of the Currency (OCC) do oversee them. The information they collect is used to create credit reports that are sold to businesses.
Equifax is the oldest credit reporting agency. It was established in 1899 to help lenders identify qualified customers, one of the main reasons credit reporting agencies are used today.
What do credit reporting agencies do?
Credit reporting agencies keep track of people’s debt and how well they manage that debt. Each agency compiles its own score, based on data they have collected on the way people use credit. That can include their payment history, current available credit and current amount of credit usage. In summary, their job is to track if someone pays their debts on time and if they borrow responsibly. Typically, the more financially responsible you are – high credit limit, low credit utilization and a history of timely payments – the better your credit score.
Credit reporting agencies track everything from when you apply for a new credit card to when an account is closed. They track your payments and know when you have missed one. They know how much your car loan is and your mortgage.
When you want to take out a loan, apply for a credit card or buy a house, lenders will request your credit report from one of the major credit bureaus to assess your creditworthiness. This helps banks and other lenders limit risk. It’s also supposed to help you not to borrow more than you can take on.
How to use credit reporting agencies to improve your credit.
You can request your credit report from the credit bureaus. You can also view your credit score and other helpful data by creating an account with sites like CreditKarma.com. Keeping track of your credit score and history is important. By regularly checking your report, you can catch fraudulent activity. You can also rectify missed payments in the event that you forgot to pay money owed. By monitoring your credit utilization, you can prevent your score from dipping. Keeping your credit limit high and credit usage low is key to a good score.
One way to protect your credit limit is to track your credit age. If you have older credit cards you haven’t used in a while, it’s time to put them to use before they are cancelled by the credit card company. Even making one small purchase a month can keep your credit card in good standing and protect your credit age. If you do not use your credit card over a certain period of time determined by the credit card company, they can close your account. If it’s an older account, it can hurt your credit age. Regardless, it will impact your overall credit limit.
If you have high credit utilization but can’t seem to pay off your high-interest credit cards, Uprova can help. You can request a personal loan from Uprova.com to consolidate your other debts into one easy payment. You can request up to $5,000 at a time. If approved, funds are transferred in as soon as one business day.
Credit reporting agencies play a key role. They are neutral third parties that compile data and help lenders and businesses make important decisions about how much credit to extend to a customer. They also keep track of all your responsible spending to help you score a better rate on the loans you need to get the things you want. Monitoring your credit report regularly can help you maintain a healthy score and take the actions required to improve it.