Credit bureaus capture financial data from many sources in order to create credit histories for individuals. They then sell the results from this collated information on the basis of specific requests from banks or other creditors. This will identify people with a poor credit history. Ironically people who have never borrowed or had a credit card may find it harder to get their applications approved than applicants who have borrowed often and frequently been late with their payments. At least the latter have a credit history.
There is always the risk that the data held against individuals is inaccurate, resulting in them being effectively blacklisted for new credit. Consumer advocacy groups have campaigned to give individuals the right to check the accuracy of data held on them. Legislation in most developed countries has been enacted to establish procedures to enable this to be done.
Credit appraisal and approval processes are highly standardized and frequently highly automated. Banks must strike a balance between the losses avoided from rejecting applications of lower quality and the income foregone as a result. If the criteria are too conservative many potentially profitable applicants will be turned away and get a card from a less conservative issuer. In most cases the approval process consists of no more than three controls described in the following articles.