CBR: Understanding the Credit Bureau Report

What is a CBR?

A CBR, or credit bureau report, is a credit file disclosure report that contains information related to your credit history. The report is compiled by consumer reporting companies known as credit bureaus. The reports are provided to third parties, such as banks and credit card companies. Equifax, TransUnion and Experian are three well known Credit Bureaus.

The consumer's report contains a record of everyone who has received a copy of their credit file disclosure within in a certain period of time. These are known as inquiries on the CBR. Inquiries are separated into two categories – hard hits and soft hits. A hard hit inquiry appears on the CBR to a third party, while a soft hit is not disclosed.

Every time a consumer applies for a credit card, department store card or  car loan, the consumer gives the prospective lender permission to obtain their credit report. Anytime a lender requests a report, it registers as a hard hit on the consumer's credit report. Too many hard hits in a short time span could have a negative effect on a consumer's credit score, which lenders use as metric to judge a consumer's credit worthiness.

A soft hit on the other hand is not visible to third parties and does not affect a consumer's credit score. Anytime a credit card company requests a CBR to perform an account review or for pre-approved credit card applications,  or a collection agency requests credit reports to gather contact information on consumer's who may have unpaid debts, it registers as a soft hit. A soft hit has no effect on a consumer's credit score.

How do lenders use the CBR?

When a lender requests a CBR, they use the information it contains to judge a consumer's credit worthiness. Indicators of credit worthiness are a consumer's income to debt ratio and the number of hard hit inquiries that exist on the report. Debt to income ratio compares the consumer's debt to the   income they earn to pay that debt. If the consumer has more debt than income, their credit score is affected, and the likelihood of being approved for a loan diminishes. Too many hard hits on a CBR also can affect a consumer's credit score. When there are too many hard hits on a CBR, a lender can't tell how many of those inquiries will actually convert into actual loans.

For more information, visit the NCO Financial Systems, Inc.,(“NCO”) consumer website at www.consumerhelpunit.org.

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