Why do Credit Bureaus and Credit Reports Exist?

You may have heard of people complaining about credit bureaus and of having to get a credit report before seeking any financing. Nowadays this system seems more like a nuisance to people rather than a help.

However, there really are reasons why credit bureaus exist, and why you have all your financial history on paper. The reason why do not always ones that count against you, especially if you have credit that is in the good to excellent range.

Advantages of credit bureaus and credit report include the following:

• This system is used to verify it is you that is applying for a car loan, house loan, or phone service. This can drastically reduce the chance of identity theft and if someone has placed an unauthorized charge on your account your credit report may reveal it.

• Identity theft is also much easier detected. That is because unauthorized purchases and loan inquiries will be found in your files. This is for your protection so that you can more easily take care of the situation if it does happen.

• It gives you a tool by which to measure your own creditworthiness. This helps you make the steps you need to make in order to make changes if you need to make changes. It also helps business owners as well as bank lenders and credit card institutions that you are good for your money.

• Credit bureaus can also be regarded as a huge record-keeping service. All of your major spending is kept track of, even if you pay all your bills on time. This is one more way that you can gauge your spending.  It helps you in the event you want to improve your spending habits.

• Your credit report can be used to help you budget your money. A credit counselor can help you negotiate your debts owed. It is used often as an incentive for people who want to become more creditworthy in the future.

• A credit bureau can also verify your geographical location. It also can be used for investigative purposes in the event of some type of emergencies. It can only be used under certain stipulations though of course.

Your Rights

You can find a long list of rights as a consumer which is explained within the Fair Credit Reporting Act documentation. There are many conditions under which you are entitled to a free copy of your credit report. Fraud is one of them and another is if you are unemployed and plan to look for a job within 60 days.