Introduction to Credit Bureau for Kids and Teens
This video explains the concept of a Credit Bureau in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about Credit Bureaus, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Elementary School
- Middle School
- High School
The topics covered are:
- What is a credit bureau
- What kind of information do credit bureaus have about you
- Where do credit bureaus get this information from
- Why are credit bureaus important
What is a credit bureau?
A credit bureau, also known as a credit reporting agency, is a company that collects information about peoples’ financial transactions, which is then used to create their credit reports and credit scores.
Potential employers, landlords, insurance companies etc., also use the credit reports and credit scores to evaluate the creditworthiness of an individual before entering into a financial contract with them.
The three major credit bureaus are Equifax, Experian, and TransUnion.
What kind of information do credit bureaus have about me?
They have your personal details like name, date of birth, Social Security Number (SSN), past and current addresses, employment history, etc.
They collect information on your current and past loans and credit accounts, payment history – including late and missed payments, credit utilization, length of credit history, bankruptcies, etc.
Credit bureaus also keep a record of all inquiries made about your credit – for example, by a bank when you apply for a loan.
Where do credit bureaus get this information from?
Most lenders provide information about your borrowing behavior to one or more of these credit bureaus. So banks, credit card companies and mortgage lenders would be the primary source of information.
Utilities and phone companies can also provide information around your bill payments. Some information – like bankruptcies – comes from public records.
Depending on the number of sources who have reported your information to each bureau, your credit report and credit score may vary slightly across these 3 bureaus.
Why are credit bureaus important?
Credit bureaus play a very vital role in your financial life.
While they do not directly decide whether you can get a loan or the terms of the loan, they heavily influence the decision made by lenders through their credit reports and credit scores.
So whether you are going for something big like a mortgage, or simply applying for a new credit card, unless you have a good credit score it can be very difficult or very expensive to get it.