What Exactly Is A Credit Bureau?

A credit bureau is a company that collects data from lenders and compiles it in the form of a credit reports for every borrower. The information provided in an individual’s credit profile includes various aspects like how much money is still being owed the borrower to different creditors and the record of credit debt payments in the past and at present.

Why Are Credit Scores So Important? How Do Lenders Use Them For Interest Rate Calculations?

There are 3 major credit bureaus in the country that rate borrowers’ credit profiles – TransUnion, Equifax and Experian. Each of the credit bureaus uses a different set of parameters for assessing a borrower’s creditworthiness. Typically, a credit score of an applicant reveals a complete picture of a person’s past loan repayment record and the manner in which he/she has handled debts.

Lenders use the credit information of borrowers (applicants) for making their lending decisions. It has been observed that auto loan companies prefer credit reports issued by one bureau over the other two for approving or denying loan applications.

Credit Reports Issued By Which Credit Bureaus Are Mostly Used By Car Finance Lenders?

Normally, auto loan providers use credit reports issued by Experian and Equifax for the calculation of interest rates. Only a few car finance dealerships use credit reports provided by TransUnion for running credit checks. The main reason for this is that the credit reporting services offered by Experian and Equifax are specifically directed toward the automobile industry.

In any case, it hardly matters what credit report is issued by which credit bureau is being used by car loan dealers as the credit score and credit report of a borrower imply the same regardless of which credit bureau your lender is using. Nevertheless, if a credit report issued by one of the bureaus is frozen for whatsoever reason, it is crucial for you to determine which credit score your chosen lender uses to calculate auto loan rates. Accordingly, you can unfreeze the credit report.

Why Is There A Difference In Credit Scores Between Credit Bureaus? Know About It Now!

The credit scoring systems used by the 3 credit reporting agencies to determine credit worthiness of borrowers are distinctly different. This is primarily due to the fact that it is the creditors’ decision to send borrowers’ credit and debt repayment information to the bureaus of their choice. While most creditors report payments to all credit bureaus, it is not a statutory requirement.