How did these companies pop into existence, and why hasn’t a 4th (or 5th or 6th) company sprouted up?
ISTM that these companies would have to get the blessing of the federal government first, since they need access to your SSN.
I want to start a 4th credit bureau. Is it possible, or is the system rigged to have 3 and ONLY these 3 companies?
Would a 4th company require legislation from congress? Or, if I get the investors, will SSA have to turn over their database to me so i can compete with the other 3 on an equal playing field?
Interestingly, there actually is a fourth credit agency in the US called Innovis. Based on what I have learned of late, they essentially are a repository of information gleaned from the traditional big three, and are often used by mortgage lenders.
when you sign up for credit you are giving them access to your social security number. They don’t get it automatically. Of course if you refuse to give them your SS# you won’t get credit.
They also don’t get access to government files either.
A creditor can choose what bureau they want to report your credit information to. Indeed often the three reports differ to varying degrees, because not all creditors use all three databases.
There are different types of “credit” agencies too. ChexSystems is a somewhat similar type of agency for checking accounts. Businesses have different credit reporting agencies than individuals and use an EIN (Employer Identification Number).
So yes you are free to start a credit agency. The government regulates them like any other business, just follow the regulations. The trick is getting people and business and banks to USE your service.
New wrinkle - why, as a bank or other big, important Financial Services ™ company, would I want to go out of my way to report every transaction I have (retail) to these agencies?
If you look at your credit report, you see payment history for every loan (including 'revolving credit (credit card) debt). That info takes time and bandwidth to produce.
Why should I?
Of course, by now, all of these practices have been ‘Grandfathered In’, and are exempt from newer restrictions on use of SSN and financial details
But as a practical matter they probably pull at least some data from at least one of the big three because the biggest hurdle is getting people to proactively report to you. The big three probably have that sewn up.
Because I, as Big Important Financial Services Company, want to know whether you as applicant or customer pay your bills on time or not, even to other companies, and the only way to get other companies to tell me that is to tell them (through their proxy the credit bureaus) about all of my customers.
If you are the kind of customer who always pays his/her credit card bills in full every month, I want to market certain products to you. If you are the kind of customer who runs a big balance but always pays at least the minimum due every month, I have different products for you. If you have a habit of defaulting on your credit cards and filing for bankruptcy every seven years, I’d kinda like to know that before I let you run up a balance on me, and I’d really like to know whether it’s been six months or six years since the last trip to bankruptcy court.
Nobody reports retail transactions to credit bureaus.
It takes about a billionth of a second of computer time once a month per customer.
Because you want your competitors to do the same thing, so you have accurate data about potential credit risks. The credit bureaus were started specifically as information clearinghouses for banks and other creditors to share data about their customers, because they recognized that doing so was to their mutual benefit.
I once heard the quip ‘The person who just went through bankruptcy is the better bet than the one who didn’t - the bk person can’t file bk; the non-bk can’.
