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Chapter 11. CREDIT REPORTS > How the System Works

How the System Works

Each of the three major credit-reporting agencies receives over two billion items of information on individual accounts monthly that is reported to them voluntarily by businesses with which consumers have accounts. These businesses report positive information about the account, such as a prompt payment history, as well as negative information, such as late payments or the turning of an account over to a collection agency. All this information is organized and used to create individual credit reports for consumers. The information within a person's individual credit report is used to calculate the credit score for that individual. Again, it should be noted that because each of the credit reporting agencies independently assembles its own credit reports on individuals, the credit report and resulting credit score will differ from agency to agency, thereby creating triple the chances of having mistakes on your credit report.

When a consumer applies for credit, the business to which he is applying requests a copy of his credit report from whichever credit-reporting agency it uses in order to evaluate the application. This happens more than two million times a day.


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