hat information are banks able to buy from credit bureaus about my financial history and standing, and what do they use it for?
Lenders, such as banks, purchase a person’s credit files – which represent that individual’s creditworthiness – when that person decides to apply for credit. Thus, a lender buys a person’s credit file from a credit bureau such as TransUnion. The type of credit information found in these files includes:
Personal information (identity details, address, contact numbers).
Existing credit, such as home loans, car finance, clothing accounts, credit cards.
The payment history, which would indicate whether or not you meet your monthly credit payments.
Negative listings – if you have any. These would include defaults, judgments and insolvency.
Enquiries/credit applications from companies that have accessed your credit report for application purposes.
The credit score, which is a numerical value based on analysis of a person’s credit history calculated by a credit bureau such as TransUnion. There are a number of factors that influence your score, such as your income and expenses that you provide when you apply for that loan through your financial institution.
It’s important to understand that there are many different credit-scoring models out there that are created by different credit bureaus, and each may use a different scale to convey information. It’s up to individual lenders and insurance companies that use these scores to decide which scores demonstrate an acceptable level of risk.
The lenders, such as banks and credit card companies, use the credit bureau information listed above to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt.
Because the credit report shows the consumer’s behaviour when it comes to paying existing accounts, lenders use this information to assess how a consumer manages their debt/financial responsibilities, and then make a decision to either offer the credit or decline the request. Can a poor credit record affect your chances of getting a job?