Chapter 1. What do Credit Reporting Agencies do?

So now you know the importance of the FICO score. Then how can you get information about your FICO score? There are some credit reporting agencies you can refer. But, before we discuss the functions of credit reporting agencies, let us discuss different types of credit.

 

How to

Credit is the ability for a consumer to borrow money in order to purchase a product or service.

There are four (4) different types of credit:

• • Revolving credit
  • Charge card
  • Service credit
  • Installment credit

You can get credit from a grantor such as a bank or a financial institution to whom you pay back the principal amount in addition to interest and possible late fees, penalties, or other charges. Each time you borrow a new credit, you get an entry on your credit history. When you pay your credit on time and hopefully in full, you also get an entry of your financial behavior in addition to opening the door for more credit invitations by grantors to get you to accept more accounts on credit. This is why it becomes easy for a college student to obtain additional credit cards after securing their first. (See our module on Credit cards for more information).

From a financial literacy perspective, we DO NOT encourage you to accept credits that you do not need. But, for you to secure a car loan or a mortgage, you will have to establish a credit history and an excellent financial reputation using credit. 

 

Credit Reporting Agencies (CRAs)

Main function of CRAs: To follow, record, analyze, and report every credit-based financial transaction by consumers

Three most recognized credit reporting agencies in the U.S:

• They provide consumer credit information and insight knowledge to help consumers make informed financial decisions. 
  • Equifax - http://www.equifax.com/ Links to an external site.
  • Experian - http://www.experian.com/ Links to an external site.
  • TransUnion - http://www.transunion.com/ Links to an external site.

By law, each consumer is entitled to obtain one free credit report per year from each of the three Credit Reporting Agencies. A consumer can get them all at the same time or space them throughout the year. Consumers will have to pay a fee to get the FICO score. To check your credit score, check out https://www.annualcreditreport.com/ Links to an external site. or call 877-322-8228.

 

Practice

Now that you know what CRA's do, think of paying it forward and discuss these agencies with a friend or a family member.

 

Congratulations! You can move on to Chapter 2. Crossroad of what makes the FICO Credit Score!

To review the full module on the FICO score, click here.