Banks and financial institutions may sound the same, but they’re two different entities that work in different ways. They can be classified as banking financial institutions, or banks’ and nonbanking financial institutions. These are called financial institutions.
On a top level, banks are commercial entities whose role is to accept deposits and give loans. But financial institutions like investment banks, insurance companies, and financial firms are more inclined to offer various services schemes and plans to their customers.
Banks
Middlemen
Banks are banking financial institutions that function as middlemen. They connect depositors to lenders. A bank’s basic workflow is to accept deposited funds, and then lend these funds to customers who need it. A bank’s customers are generally people who want loans for various reasons. This can range from investment, education, or personal purchases.
Payment Agent
Banks have another function to perform. They act as a payment agent. They offer payment services like debit cards, credit cards, cheques, cash deposits facility, and draft facility and more. People deposit money in banks for three primary benefits safety, income through interest, and convenience.
The deposit is the money that the bank uses to generate revenue. The volume of these deposits decides the capacity of the bank to lend funds. Alternatively, a bank invests these deposits in assets or financial securities too.
Financial Institutions
Financial institutions are non-banking institutions. These include investment banks and companies and firms that are into leasing, insurance, investment and financial services and schemes. They work across a more wide range of financial sectors like
Service to corporates: Underwriting debt, share conflicts, security trading, business investments, company advisory services and derivative transactions as well.
Protection schemes: Insurance companies offer schemes and service against potential losses.
Investment and Pension: Mutual Funds and Pension schemes provide retirement plans and long-term saving returns. Investors are allowed to invest in these funds and then receive an interest income on returns.
Leasing: Leasing companies make huge capital available for large investments. This includes real estate purchases and costly equipment purchases.
To Summarize The Differences
Banks are middlemen between depositors and lenders. Financial institutions are more service providers than actual banks.
Banks generate revenue by the interest they earn on the loans they lend. Financial institutions generate revenue through a more complex procedure. This includes fees, commissions, premiums, and installments.
Banks can accept deposits, non-banking financial institutions cannot. So, they create other schemes and services.
Banks are a safer place to deposit funds and savings. Non-financial institutions are for income, retirement, and investment.
The difference between banks and financial institutions is something that not a lot of people are aware of. But this is important since if you’re looking to save or invest money, that’s something that you should be aware of. If you’re someone that is looking to either save your money or try and invest it such that you’re ready for an early retirement, then you’ll need to know the differences between the two. It can make a world of difference.
There are companies that work on collecting and maintaining credit information of consumers. These are known as credit reporting agencies (CRAs). There are three such major CRAs in the country, namely Equifax, Experian, and TransUnion. Apart from these, there are other smaller-scale agencies too that specialize at the job. If you’re worried about “where to get my credit score?,” the larger CRAs are the most reliable bets.
These major CRAs obtain information from companies that you hold business and transactions with. People or companies that lend you money regularly report to these CRAs on your repaying status. There is also detailed information on the amount you are indebted and whether you have ever defaulted on your payments. Aside from the reports obtained from lenders, these companies also tally your general records based on certain other aspects. Some of these aspects are your public records from the local and state judiciary. These include your tax records and bankruptcy information. This information makes up an important chunk of your credit score and its report.
Equifax
Present in 24 countries, Equifax is an agency that offers consumers protection against identity theft and credit fraudulence. They also sell credit reports and credit monitoring assistance to businesses.
Experian
Experian started off in London and is now a trusted agency in 39 different countries. It provides you with a credit score, credit report, and even credit tracker on subscription. The agency uses FICO 8 system of credit score calculation. Experian was a part of Forbes’ “World’s Most Innovative Companies” in 2018.
TransUnion
Based across 30 countries with a database of over 1 billion consumers, TransUnion is another CRA giant. The agency, like the other ones, will provide you with your credit score and your credit reports. In case you decide to freeze your TransUnion credit report, it will also go the extra mile to notify Equifax and Experian, which frankly is a big help especially in case of identity theft and credit fraud.
So, the next time you are sat wondering “where to get my credit score?,” think of these three giants that provide you with an annual credit score and credit report for free once each year. However, if you are looking for more frequent updates, you can subscribe to their services and receive your monthly updates.
Did you know that you have more than a single credit score? Agencies calculate your credit score based on the data in your credit reports. If you are wondering, “where to get my credit score?,” there are three main credit reporting agencies. These can have different credit scores for you if your information on each of their credit reports is different. Also, these agencies charge a fee to reveal your credit score.
Recently, it has become easier to track and get hold of your credit score without paying any fees. You can get it from your credit card company, your loan provider, and even from a non-profit counselor. Here are a few tips you can use to check your score.