Credit Report Company

The primary purpose of a credit reporting agency is to compile information about your repayment history and to then provide that information to those who might wish to extend you credit in the future. The idea originated over a century ago, when business owners were trying to figure out if it was safe to offer payment over time to certain customers.  Some business owners kept meticulous records on their customers’ payment histories, and soon found that other merchants were offering to pay for the information.  The first credit reporting companies were established soon after.

Today, there are three big credit reporting agencies: Equifax, TransUnion and Experian.  In addition, there are numerous smaller, local agencies throughout the country that serve a similar purpose.  When making a loan decision however, larger lenders tend to obtain their information from the three biggest agencies.

Both the large and small reporting agencies receive their information from lenders.  Most lenders send periodic reports on their borrowers’ payment histories to a local credit reporting company.  The local company compiles the information and passes it on to at least one of the big three agencies.  

Credit reporting companies are intended to be neutral third parties providing information only, without making any value judgments about the information.  It is up to the lender to decide how much importance to assign to the facts received.  

What goes on a credit report?

The information compiled can be both good and bad.  Lenders will let credit reporting agencies know if your payment history has been satisfactory, and for how long.  They will also send notification when a loan has been paid off.  If you make a late payment, that information goes on your report as well. A credit report will specify just how late the payment was, and how many times this occurred.  

More serious incidents such as repossessions, bankruptcies and foreclosures are also reported.  Since credit reporting agencies have access to public records, items such as liens and judgments can also appear on a credit report.  

What is a credit score?

The credit score was developed as a way to summarize all of the information compiled on a personal credit report.  Lenders dealing with a high volume of loan decisions simply did not have the time to go through each report line by line.  As a result, a computer program was developed to sift through all of the information, assess a variety factors, and generate a numeric score.  The computer looks for patterns, problems, and warning signs that might be of interest to a lender.

The score is based on a very complex algorithm, and there are very few who know every single factor that can impact a score.  Generally though, it seems that a good score is based upon the following: a lengthy payment history, moderate credit usage throughout that time, low to moderate use of available credit, and few or no delinquencies.  By the same token, a low score might reflect a short history, high use of available credit, and numerous delinquencies and other derogatory information.  A high number of recent inquiries into a personal credit history can also negatively impact the score.

How is credit reporting used?

Whenever you apply for a loan, it is just about a certainty that the lender will contact a credit reporting company to find out about your history.  In recent years, a number of other parties have started using credit history in their business decisions as well.  Landlords often pull credit reports on future tenants, employers might look at this information as part of their hiring process, and insurance companies can base their rates on credit history.  In all of these cases, the party wishing to see your credit history must receive your written authorization to do so.  There is some controversy associated with some of the non-credit uses of credit history, and the subject is still being debated in the courts and legislatures.


Credit reporting companies compile information about consumer payment history from various sources and provide it to lenders making credit decisions.