Equifax(r), Experian(r), and TransUnion (r). They’re three major credit bureaus which gather data to create your credit reports and determine your scores.
Consumer reporting agencies sell your information to lenders, employers and landlords – but how exactly do they collect it all?
What they do
Equifax, Experian and TransUnion are three credit bureaus that collect data about consumers’ borrowing behaviors to generate their credit reports and scores, which lenders, employers, landlords and others use to assess whether someone poses an acceptable credit risk or not.
Information gathered by credit bureaus comes mainly from financial institutions like banks, credit card companies and mortgage lenders – which serve as “data furnishers” to them and pass along data such as monthly payments, past-due accounts and bankruptcy filings to these specialized agencies that compile this kind of data.
As a consumer, you likely have at least one credit report from each of the three main credit bureaus–Equifax, Experian and TransUnion–that serve you. There may also be specialty bureaus such as PRBC/MicroBilt that serve lenders offering subprime loans to low-income borrowers. Equifax, Experian and TransUnion may sometimes be referred to as national consumer credit reporting companies or credit-reporting agencies.
Credit agencies aren’t government entities, but they do possess the power to sell your information to businesses such as lenders and credit-card issuers that need it. Before conducting credit checks on you, these agencies usually need your permission first.
People tend to group credit bureaus together, but in reality they are competing to build the largest and most accurate databases possible. Credit bureaus make money from selling this data to businesses who use it to evaluate a person’s creditworthiness.
Equifax, Experian and TransUnion collectively oversee and store personal and financial data of over 200 million American residents, which requires them to manage a great deal of data efficiently while being aware of any mistakes that might occur when processing it all.
As lenders scrutinize a person’s credit report to gauge debt and other factors, the information may be outdated or inaccurate due to creditors reporting at various times to different credit agencies and leading them to assign different scores from a set of information. Therefore, it’s essential that they obtain reports from each of the three major consumer bureaus on an ongoing basis.
How they do it
Credit bureaus collect consumer information and compile it into reports. They provide services like identity monitoring and credit scoring based on that data, which lenders often rely upon when making lending decisions about credit cards, mortgages and auto loans for individuals or businesses. People may also check their own scores periodically to gauge where they stand.
Equifax, Experian and TransUnion are three main consumer credit bureaus. While often lumped together, each bureau operates separately and competes to win business from creditors who use credit reports and scores from them. They are all subject to regulation by the Federal Trade Commission (FTC).
What do the credit bureaus do? Credit bureaus collect information on individuals from various sources, including their credit-card accounts, bank statements and public records. Using internal math formulas they then calculate numerical scores that they regularly review and update as part of their business practices.
Credit bureaus sell reports and scores to financial institutions, employers, insurance companies and others – they’re considered a type of data broker by the FTC – collecting and selling personal and financial information without consent.
There are other data brokers who specialize in particular kinds of information, like ChexSystems (which offers closed checking and savings account data) or National Consumer Telecom and Utilities Exchange (NCTUE), which provides data for telecom, pay TV and utility industries.
Consumer credit bureaus not only generate and sell reports and scores themselves, but they also purchase information from outside sources such as public records or bankruptcy filings. When an initial fraud alert is submitted with one credit bureau, they must transmit it to both others – an example being when initiating an alert via one bureau alone is required to forward it onto both others for processing.
Maintaining good credit reports across all three bureaus is of utmost importance as creditors and lenders may take different approaches when reviewing someone’s credit score; some might focus on an average, middle, or lowest credit score as indicators of likelihood to lend.
How you can get a copy of your credit report
Credit bureaus gather information from multiple sources in order to compile your credit reports and score you accordingly. They’re private companies governed by the Fair Credit Reporting Act that must collect accurate data on time; Equifax, Experian and TransUnion are three such bureaus which offer their reports free once every 12 months.
Credit bureaus also offer a range of other products and services, such as data tracking, analytics and fraud management for businesses, consumer reporting and scoring services, etc. When applying for loans or lines of credit, creditors purchase your credit report and score from credit bureaus in order to assess your risk and decide whether or not to approve your application.
There are other consumer credit bureaus in the US, but the big three remain the most influential. Most lenders only consider one or two credit bureaus when evaluating an applicant’s creditworthiness; mortgage companies usually check all three. Creditors known as “data furnishers” send account and payment data directly to each of these credit bureaus in order to help compile your report – this may include credit card accounts, auto loans, mortgages and more – though each agency provides its own specific set of data, so your report could differ slightly from someone else’s report.
Considerations when judging creditworthiness include payment history, bankruptcy records, the number and types of active credit cards and loans in your name as well as how much debt you owe outstanding. Length of your credit history also plays a factor; account types (revolving versus installment), mix of accounts between them all as well as whether or not recently opened new credit are all important considerations.
Your best bet for correcting errors on your credit report is disputing them with each credit bureau directly. Each bureau offers its own process for disputing information online or over the phone; if an error remains after filing written dispute forms with each credit bureau, further action can be taken through the Consumer Financial Protection Bureau. It’s wise to check your reports regularly, particularly before applying for loans or lines of credit.
How you can get a credit score
Equifax(r), Experian(tm), and TransUnion(r) are three major consumer credit bureaus that collect information about your financial history to help lenders decide whether or not to grant you credit. They also generate your credit scores that lenders use when making lending decisions; you can access each bureau individually to see their respective scores by either logging into your online account or calling them separately and seeing which factors each is using to calculate it.
There’s an unfortunate misconception that all three credit bureaus use the same sources to gather and update your data, however each uses unique strategies for collecting it and may alter your scores slightly between agencies even though they all contain accurate information.
Equifax, Experian and TransUnion provide national credit bureau scores that lenders and creditors use when making credit decisions about you; additionally they may use information such as your income, bank accounts, level of education and criminal records when making their decisions.
Your credit score can be obtained either by purchasing a report from one of the credit bureaus, or signing up with an authorized service provider – such as a bank or loan company – that offers free scores – such as Equifax, Experian and TransUnion scores on their statements as an indicator of financial health.
No matter how you obtain your score, it is wise to have copies of all three credit bureau reports in order to check accuracy of information provided by each bureau. If errors such as an account that’s marked open when it has already closed or fraud are discovered on any one of them, disputes may be filed free of charge against either credit bureau or the creditor that reported the error. Keep your report and score clean when applying for loans, mortgages and other financial products as this will help secure you the best mortgage rates, auto loan interest rates and rewards credit card offers possible!