Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.
However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.
While there is no hard and fast definition of a credit bureau, there are some essential ways you can better understand the concept. Here mentioned are some of the same.
i. A credit bureau or credit report agency is essentially a body of professionals that test and evaluate the creditworthiness of a particular individual. They will take into consideration a number of individual credit information determining their credit history, and sell it to the creditor for a fee, enabling them to make the decision of granting loans.
ii. A credit bureau is an agency that evaluates and analyses the creditworthiness of any particular individual applying for a loan. They will check vital information like past loans, due payments, public records and more to determine the creditworthiness of that individual. This information is then sold to creditors in return of a fee helping them decide if they should further extend credit.
There are a number of instances where credit bureaus can come in handy. Creditors often hire credit bureaus as they can help:
1. Understand the debtor’s credit habits:
With information about their debts or past payment history, the creditor can better understand if they are reliable and if they will pay the loan back in time.
2. Make the decision:
With information about their credit history, a creditor can understand if they should extend credit or grant the loan. Without that information there is no other metric to judge how reliable the debtor is.
