How do credit bureaus make money?

How do credit bureaus make money? Numerous theories exist. I decided it might be a good idea to take a closer look at some of these theories.

One such idea is that the credit bureaus get paid by banks to return data as negative as possible, so banks can have the upper hand with their borrowers. In truth, this is not the case. It’s actually closer to the opposite, as the credit bureaus pay the data providers to collect information from county halls of record (source).

Others believe credit bureaus receive a greater incentive when negative data is presented. The truth is, however, that credit bureaus charge the same amount no matter what information their report contains.

So far, we’ve talked about what they don’t get paid for. Now it’s time to look at the other side. First and foremost, they get paid for simple credit reports. When a lender purchases one of these credit reports, they get paid. Since there are multiple credit reporting agencies, it behooves the company to disseminate accurate information because, in most cases, a lender will pick just one agency.

Credit bureaus also offer a service called decision analytics, which helps them sell more information. Decision analytics give lenders a better understanding of what might be in it for them over the course of the transaction with the borrower, because the data comes with analytics they can use.

Consumer services are another way credit bureaus make money. These include identity theft protection, credit monitoring services and fraud protection. As time goes by, these services are becoming extremely popular.

Finally, credit bureaus offer services that help lenders find new customers. They do so by providing the lenders with lists of individuals that meet criteria that make them prime candidates to for the lenders to target.