Credit bureaus

Credit bureau (CB, 개인신용평가회사) is a private company that collects and collates personal credit information from a variety of sources and in turn provides it to customers.

Financial institutions request this individual credit information from credit bureaus for the purpose of assessing the credit-worthiness of customers, adjusting their credit ceilings and interest rates, determining whether to continue financial transactions, and managing risk of payment deferral.

As of July 2012, NICE Information Service (나이스신용평가정보 since 1985), Siren24 (서울신용평가정보 since 1992), Korea Credit Bureau (since 2005) are conducting credit bureau services in Korea.

Key words
credit bureau, personal credit information, data protection, notice and consent

Personal Credit Information Protection
When collecting personal credit information through a credit bureau or inquiring into such information, a financial institution must obtain the consent of the individual concerned.

Massive data breach incidents, which take place more often than not in Korea, used to make profitable business opportunities to commercial credit bureaus. They are ready to give an SNS/e-mail alarm to their clients on the basis of their databases whenever any client's name and ID number happen to be misused by someone else. It's like a personal information bodyguard service.

In this regard, the Financial Supervisory Service (FSS) has requested all the credit bureaus to abide by the Best Practice since December 2011.

In the United States
A credit bureau is referred to as a consumer reporting agency in the United States. In the United Kingdom, it is called as a credit reference agency.

A credit bureau is a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses. It is an organization providing information on individuals' borrowing and bill-paying habits. This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate and other terms of a loan.

Interest rates are not the same for everyone, but instead can be based on risk-based pricing, a form of price discrimination based on the different expected risks of different borrowers, as set out in their credit rating. Consumers with poor credit repayment histories or court adjudicated debt obligations like tax liens or bankruptcies will pay a higher annual interest rate than consumers who don't have these factors. Additionally, decision-makers in areas unrelated to consumer credit, including employment screening and underwriting of property and casualty insurance, increasingly depend on credit records, as studies have shown that such records have predictive value.

Data collection and processing
In the U.S., credit bureaus collect and aggregate personal information, financial data, and alternative data on individuals from a variety of sources called data furnishers with which the bureaus have a relationship. Data furnishers are typically creditors, lenders, utilities, debt collection agencies and the courts (i.e. public records) that a consumer has had a relationship or experience with. Data furnishers report their payment experience with the consumer to the credit bureaus.

The data provided by the furnishers as well as collected by the bureaus are then aggregated into the credit bureau's data repository or files. The resulting information is made available on request to customers of the credit bureau for the purposes of credit risk assessment, credit scoring or for other purposes such as employment consideration or leasing an apartment. Given the large number of consumer borrowers, these credit scores tend to be mechanistic. To simplify the analytical process for their customers, the different credit bureaus can apply a mathematical algorithm to provide a score the customer can use to more rapidly assess the likelihood that an individual will repay a given debt given the frequency that other individuals in similar situations have defaulted. Most consumer welfare advocates advise individuals to review their credit reports at least once per year to ensure that the reports are accurate.

Commercial credit reporting and scoring bureaus also exist, and can be used to evaluate the likelihood of a business' paying creditors.

Credit Information Collection Agencies
Along with credit bureaus, in order to promote effective collection and management of credit information credit information collection agencies are also operated. Credit information collection agencies are sub-classified as centralized credit information collection agencies, that obtain credit information from all types of financial institutions, and individual credit information collection agencies, that collect credit information furnished by businesses of the same kind in the financial and non-financial sectors.

As of June 2011, the Korea Federation of Banks (전국은행연합회) had been designated as a centralized credit information collection agency, while five individual credit information collection agencies were in operation ― the Credit Finance Association of Korea, the Korea Life Insurance Association, the General Insurance Association of Korea, the Korea Financial Investment Association, and the Korea Association for ICT Promotion.