Understanding How Credit Reporting Agencies Affect Our Lives

Credit greases the wheels of life in our society. Sure, you can live on a cash-only basis, but having access to credit with attractive terms makes life easier and makes it possible to purchase big-ticket items that might be beyond your means if you had to pay for them with cash.


Among other things, having credit makes it easier to rent a car, make plane and hotel reservations, shop online, take a family vacation at Disney World, help pay for your children’s college educations, and buy a home.

For all of these reasons, it’s essential that your credit histories be full of positive, not negative, information. Also, having positive information in your credit histories makes it easier to obtain
adequate insurance, land a good job or promotion, rent a place to live,
and so on.

The three national credit reporting agencies (CRAs)—Equifax, Experian, and TransUnion—are quiet giants in your life. You may not be aware of their potential infl uence, but the credit history information they collect on you and sell to businesses, government agencies, and individuals who are legally entitled to the information can affect your life in profound ways.

Most notably, they can make it diffi cult for you to obtain credit with reasonable terms. It’s critical, therefore, that you understand how the CRAs operate—the various kinds of information collected and stored in their computerized databases, who has access to that information, and what they can do with it.

You should
also be familiar with the federal laws that regulate the CRAs, establish your credit reporting rights, and govern the companies that provide the CRAs with your information. This chapter begins that education
by introducing you to the CRAs and to credit reporting in general