Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues. Congressional Research Service. Cheryl R. Cooper, Darryl E. Getter. Updated July 26, 2019
The consumer data industry—generally referred to as credit
reporting agencies or credit bureaus—collects and subsequently provides
information to firms about the behavior of consumers when they participate in
various financial transactions. Firms use consumer information to screen for
consumer risks. For example, lenders rely upon credit reports and scores to
determine the likelihood that prospective borrowers will repay their loans.
Insured depository institutions (i.e., banks and credit unions) rely on
consumer data service providers to determine whether to make available checking
accounts or loans to individuals. Some insurance companies use consumer data to
determine what insurance products to make available and to set policy premiums.
Some payday lenders use data regarding the management of checking accounts and
payment of telecommunications and utility bills to determine the likelihood of
failure to repay small-dollar cash advances. Merchants rely on the consumer
data industry to determine whether to approve payment by check or electronic
payment card. Employers may use consumer data information to screen prospective
employees to determine the likelihood of fraudulent behavior. In short,
numerous firms rely upon consumer data to identify and evaluate potential risks
a consumer may pose before entering into a financial relationship with that
consumer.
[PDF format, 22 pages].
