Why Did The Credit Bureaus Deny My Credit Application?

credit-applicationThe credit bureaus denied my credit application!!  Wrong!  This is one of the common fallacies abut credit bureaus.  Credit bureaus compile the credit information supplied by data furnishers such as credit grantors (credit card issuers, mortgage lenders, auto finance companies, banks, credit unions, and oil companies), collection agencies, and public records (tax liens, bankruptcies and judgments).  The credit bureaus only report the information supplied to them from the data furnishers. They do not…play a part in the decision making process

The credit bureaus are not lenders or financial institutions; they don’t loan money or issue credit cards; and they can’t grant credit. On the flip side, since they can’t grant credit, they can’t deny it either.  Credit grantors use credit report information along with application information such as assets, employment, and income to make a decision whether to grant or deny credit.

One reason you may get the impression that credit bureaus deny credit is because of the wording in adverse action letters sent by lenders to applicants denied credit.  If data in the credit report was used to deny credit, the reasons are included in the letter along with the address of the credit bureaus that supplied the information.  The credit information was the basis for the decision, but the decision was made by the credit grantor, not the credit bureau.

Errors on your credit report that may adversely impact your credit and are the fault of the credit bureaus, can effect whether you are granted or denied credit.  It is important to check your credit report to make sure that everything is correct.  For example, an account that is not yours and was reported to by a collection agency can have a major impact on your credit score.  This is a situation in which the credit bureaus are having an influence on your credit, but still does not determine whether you are granted or denied credit.

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Your current credit situation and credit history provide creditors information on how you pay your bills now and in the past.  You control what is in your credit report by how currently your pay your bills and how much in debt you are. Creditors, not the credit bureaus, make decision to approve or decline your application based upon credit report information, along with other data such as income and assets.

JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.