Who’s who in credit

Have you ever had your credit checked when buying a car or applying for a store credit card? You may have been surprised by how fast the information was processed. But behind the scenes, there are a variety of organizations involved in helping to assess your likelihood of paying back the money you’re borrowing. So to better understand credit, you need to begin by understanding the various organizations and processes involved in determining whether to offer you credit and at what terms.


When you apply for a loan, lenders typically engage in a process called “underwriting.” Underwriting is simply the process by which lenders assess information about you in order to determine whether to offer you credit and at what terms. This usually involves evaluating your credit profile, which most lenders do by pulling your credit score and your credit report from one or more of the three national credit reporting companies (CRCs). In the process of underwriting, lenders may also consider other information you give them (unrelated to your credit file), such as down payment, loan-to-value ratio, employment history, etc., when performing underwriting.

Lenders also regularly report information to the three national CRCs about you, such as how much you’ve borrowed and whether you make timely loan payments. Every time you use credit, whether paying for groceries with your credit card or taking an interest-free loan on your living room furniture, it can impact your credit files.

Credit Reporting Companies (CRCs)

There are three national CRCs: Equifax, Experian, and TransUnion. Each collects credit information from some 13,000 lenders and other data providers. This data makes up your credit files at each CRC. You have one separate credit file at each national CRC. Lenders choose which credit file they use to understand your credit profile.

Credit scores / credit scoring models

As part of the underwriting process, lenders usually obtain your credit score, a three-digit number derived from information in your credit file, from one or more of the CRCs. A credit score, like the VantageScore credit score, is a numeric interpretation of the information in each of your three CRC credit files. Credit score model developers, such as VantageScore Solutions, build and test mathematical formulas to predict the likelihood that you may become 90 or more days overdue on a loan or line of credit, which is known as a “default.”

Generally, credit scoring models each look at different factors depending on the contents of your credit files, but they will include the amount of loans currently extended to you, loan balances you have, and your history of making payments, on time or otherwise.


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