Recap! I The Record Keeper- Reviewing the nature of a Credit BureauDec 092020
A credit bureau is an information business. It seeks to bridge the gap between the creditor and the consumer to aid in the financial transaction they will be seeking to engage in. We all know the problems that may arise when there is a lack of information. There is usually confusion, misperceptions, misunderstanding, bad decisions, and regret. To avoid such, credit bureaus or credit reporting agencies in their intermediary role collect information pertaining to the identity of the data subjects and the corresponding account information and in particular their payment history from various creditors. The information collected is compiled and consolidated in the format of a credit report or credit score to be used by authorized creditors or the consumer. Thus, a credit bureau serves as a record keeper organizing and noting the credit history of the data subject as furnished by the creditor. However, a credit bureau does not make its own determination as to the creditworthiness of a data subject but rather the creditworthiness is merely reflected based on the information provided by creditors.
This information reflects the credit history of the data subject thereby showing how the data subject paid or is currently paying their debts or services. This historical information in turn is used by creditors in their analysis of the prospective client viability to qualify for the loan or service being sought. With such information at hand, a creditor is better poised to make well-informed decisions and avoid the misperceptions that arise in the absence of information. The credit report aids in the evaluation of any potential risks and is a major factor in determining whether to extend credit or engage in a credit transaction. The credit history serves as a predictor of the person's likelihood to repay the debt or make the payments. It can also be used to gauge whether a person may have the means to repay the debt or whether they are already heavily indebted. The consumer who has a good history of paying debts can use a credit report to avoid some of the stringent terms that can be imposed by institutions as a means of mitigating against any risks of defaulting such as paying a high deposit or provide some form of collateral. Not only is the information used in instances where a credit transaction is occurring but it may also be used by employers as a means of screening a prospective employee to determine the suitability to be entrusted in what is usually a post which requires the upmost financial propriety.
As said by Williams Pollard, information is a source of learning. But unless it is organised, processed and available to the right people in a format for decision making, it is a burden, not a benefit. Credit bureaus undertake the burden of information to ensure that is it a benefit for all and make credit work for you!