Whenever a consumer applies for a loan, a credit card, or a special retail store financing offer, there is a system of checks and balances working behind the scenes that allows lenders to make timely, informed decisions about their credit worthiness. An important part of the decision-making process involves an assessment of the consumer’s credit history, which is typically accessed by lenders in the form of a credit score.  The credit score is a numerical representation of the information contained in a consumer’s credit report. For example, were existing accounts paid on time; for how many other loans or credit cards did the consumer recently apply; how high are the balances on credit cards in comparison to the credit limits on those cards.

Any consumer who has used a credit card, or taken out a loan to buy a car or a home, is likely to have a credit report on file with each of the three national consumer reporting agencies (CRA): Experian, Equifax and TransUnion. Once every 30 days, information about a consumer’s ongoing credit activity is relayed directly by their creditors to the three national consumer reporting agencies separately. The consumer reporting agencies receive, compile, and maintain the history provided by the creditors and lenders. As the information in a consumer’s credit report is being updated constantly, their credit score changes along with it.  It is important to note that a consumer’s reports and scores are likely to vary with each CRA since not every lender reports information to all three major agencies at all times.

The CRAs do not make decisions on whether a consumer qualifies for a loan or credit card. Those decisions are made directly by lenders. When a lender is assessing a consumer’s eligibility for a loan or credit, they access one or more of these reports and the corresponding credit score to assess the consumer’s credit history.  Generally, lenders score consumers based on a range of 300 to 850, with scores of 750 and above receiving the most favorable loan rates and terms.

Helpful Tips

  • Consumers have three credit reports, which are maintained by the three national consumer reporting agencies: Experian, Equifax and TransUnion.
  • The information in these reports comes directly from a consumer’s creditors and indicates how responsibly they have handled their finances over time.
  • Lenders review a consumer’s credit reports and scores to help make informed decisions.

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