What are credit bureaus and how do they work?

Understanding credit bureaus.

Your credit reports carry so much weight and can define your financial choices and outcomes. The companies in charge of compiling and selling your credit report have a great deal of influence over your financial life.

These companies are known as credit bureaus.

Credit bureaus keep a record of your credit history. This is why they're also known as credit reporting agencies. They collect information about you from banks and other lenders who might have extended a loan or credit to you in the past, and they will provide you with a report on your creditworthiness.

What do they do?

Credit providers such as banks and clothing stores all send information about your accounts, your payment history and missed payments to the major credit bureaus in South Africa. The credit bureaus compile this information into a report known as your credit report. They also use this information to calculate your credit score, which is a single number used to determine your creditworthiness.

Lenders can approve or reject you for lending agreements based on the information in these reports. With that being said, payment histories are also often taken into account, along with other factors in an effort to develop a clear picture of each individual's overall payment habits and whether they are deemed responsible in dealing with their financial obligations.

Do the credit bureaus make lending decisions?

No. Credit bureaus provide some of the information creditors and lenders use to help them make important lending decisions. Lenders rely on credit report data to help determine whether they choose to approve applicants for financing or not. While the bureaus act as an aggregator of details around specific consumers' borrowing habits, it's ultimately up to individual lenders or creditors if they want (or don't want) to offer someone a loan based on their circumstances.

Credit bureaus collect and store your credit history data which is used to calculate your credit score.