Credit bureaus provide credit histories to banks and insurance companies, in order to help deal with the problem of

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Credit bureaus provide credit histories to banks and insurance companies to help deal with adverse selection, which is the problem of asymmetric information in which those with the highest risk of default are the most likely to seek out credit. The credit history allows lenders and insurers to assess the risk of potential customers and make more informed decisions about whether to offer them credit or insurance.

Credit Bureaus Provide Credit Histories to Banks and Insurance Companies