Credit reporting companies refer to agencies that collect useful borrower-related information for later use. For example, they can submit it to a genuine money-lending organization for productive loan review.
Let us go through additional spelled-out functions of these licensed organizations.
4 Functions of Credit Reporting Companies that Borrowers Should Know
Here are the primary responsibilities of a credit reporting agency.
Documents borrowers’ information
All credit reporting agencies gather as much information as possible about a borrower from reliable sources. After that, they prepare files about each previous loanee and sell them to financial institutions.
Preparing a credit report
A bank may request this agency to provide a loan report about a customer to determine whether they are trustworthy. Usually, this document features crucial details like your debt repayment habits and past loan amounts.
Calculating and analyzing a borrower’s credit score
A credit reporting agency can help the bank determine whether a customer’s credit score is genuine. Usually, the score increases whenever one repays an existing loan in time and drops when you fail to honor your loan terms.
Loan terms
Lastly, the agency can draft the conditions of different loans, including credit insurance, for the good of all parties.
Critical Information that Credit Reporting Companies Submit to the Lenders
Certified credit reporting companies gather crucial information which they can provide to lenders to avoid losing money to defaulters. These details include:
Repayment history
A credit reporting company can submit this information to the lender before they approve a borrower’s loan request. Usually, the bank extends the loan to customers with a healthy loan repayment history because they can’t default.
Previous loan amounts
Secondly, this firm informs the lender of the loans the new borrower has requested in the past. Therefore, they can determine whether he can repay it on time based on their monthly income.
Loan terms
Further, these companies can inform the lender of the terms and conditions of all the loans the borrower got in the past.
Credit score
New lenders require this information to ascertain whether a borrower is creditworthy. Financial institutions request this information to ensure they strictly approve loan requests of deserving borrowers.
Borrower’s bank accounts
A credit reporting company establishes all the open accounts a customer has to help them determine their creditworthiness.
Key Points
Finally, customers should know that credit report companies strictly sell loan-related information to lenders. Therefore, they do not breach bank customers’ data privacy lest one can sue them.