What is a Credit Bureau?

A credit bureau is an agency that collects and stores consumer credit information. This data is typically sold for a fee to creditors so that they may determine a consumer’s credit worthiness and use the information to make decisions regarding approval of loans and other credit related activities. Typical clients of credit bureaus include banks, mortgage lenders and credit card issuers. A credit bureau is also sometimes referred to as a consumer reporting agency (CRA) or credit reporting agency. The three largest credit bureaus in the United States are TransUnion, Equifax and Experian.

How Do Credit Bureaus Make Money?

Credit Bureaus make money by selling data. Anytime a credit report for a particular consumer is furnished the credit bureau charges its client a fee. Credit bureaus also sell data in baskets. This can be used for advertising purposes and more precise targeting of consumer’s financials. Data is a big business and the three credit bureaus are at the forefront of it in the United States. Reporting of the consumer credit information is big business and it's important information. Anytime a consumer misses a payment and makes a late payment, creditors want to know.

Qualms of Storing Data

Unfortunately storing sensitive data isn’t always an easy process. When you store data you also have to have profound security measures in place to protect it. Many credit bureaus have had data breaches and due to this have faced various class action lawsuits. The breaches are costly and everyday consumers are often times the ones that suffer the most, regardless of whatever the class action settlement payout is (it’s often times negligible).