What is the role of a credit bureau?

A credit bureau serves a fundamental role in the financial ecosystem by collecting and maintaining information related to individuals' credit histories. This information includes details about credit accounts, payment history, outstanding debts, and any bankruptcies or defaults. The bureau aggregates this data to create comprehensive credit reports that lenders can use to evaluate the creditworthiness of potential borrowers.

By collecting this information, credit bureaus enable lenders to make informed decisions about extending credit. They do not provide loans themselves or directly engage in financing purchases, nor do they regulate interest rates. Instead, they act as intermediaries, providing valuable insights that help lenders assess risk and manage their lending processes effectively. This service is critical for maintaining the integrity of the credit system and ensuring that borrowers are treated fairly based on their credit histories.