How do credit bureaus make money?

Credit bureaus act as information brokers for consumer credit history. They are normally presented as agencies that sell their services to banks, mortgage lenders, credit card companies, retailers and other businesses that grant credit. There are three major national credit bureaus in the United States–Equifax, Experian and TransUnion–and all three obtain and sell information in similar ways.

On the surface, the financial arrangement between lenders and credit bureaus does not make much sense: Credit granters provide consumer credit information to bureaus for free, then they pay to have credit information sent back to them. The credit bureaus are able to collect, aggregate, synthesize and analyze the enormous quantity of information sent to them.

Four Data Products Sold by Credit Bureaus

Credit bureaus sell four data products: credit services, decision analytics, marketing and consumer assistance services.

Credit Services: Credit services are what most people think of when it comes to credit bureaus. The credit bureau receives a request from a lender for a consumer credit report, which the bureau sells to the lender.

Decision Analytics: Credit bureaus do not just want to sell a history of borrower payments. Instead, the bureaus package detailed transaction history with analytics about the way an individual interacts with certain debt. Lenders pay more for these reports.

Marketing: While it is not a traditional form of marketing, lenders that offer pre-approved credit are paying a marketing fee to a credit bureau for a list of consumers who meet predetermined requirements.

Consumer Services: Credit bureaus also interact directly with consumers, usually through credit monitoring, identity theft protection and fraud prevention. These services have become increasingly popular as the risk of identity theft has grown.

(For related reading, see: The Top 3 Credit Bureaus.)

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