Understanding the Three Major Credit Bureaus
Learning about the three major consumer credit bureaus can help you to familiarize yourself with your own credit score. The three major consumer credit bureaus are:
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A credit bureau is an entity that collects information about you and how you have managed to use credit in the past. Essentially, credit bureaus store our information and use it to build us a personal track record of our financial accounts and credit file. This organized track record is better known to the average consumer as a credit report.
Oftentimes, these three big credit bureaus are seen and referred to as one, when in reality, they are competitors in the business of supplying creditors with information.
So, what is this data used for?
The data that Experian, Equifax, and TransUnion collect is generally used for:
- Calculating credit scores.
- Lenders to make decisions about whether or not to offer a consumer a credit card or a loan and at what interest rate.
- Some pre-employment screening background checks.
- Evaluating lease applications.
- Insurance companies to determine what rates to give.
- Deciphering whether or not the consumer is required to pay a utility deposit.
As a consumer, you have a right to check your credit and are entitled to one free annual credit report from each major credit bureau.
How credit reporting agencies collect information
The services provided by these credit bureaus are beneficial to creditors when they are trying to decide whether or not they want to offer credit to a consumer. That means that even though creditors are not legally required to report information to the credit bureaus, most of them will do it anyway, since it helps their business.
So how do credit bureaus get their information?
- Creditors: In the world of consumer finance and credit accounts, creditors are often known as “data furnishers.” Banks and credit card companies usually report your payment history and how you’ve handled credit cards and loans to either one bureau, two or all three. This is why if you check your credit report from each bureau, you might notice a slight difference between the three at times.
- They purchase or collect information: There are some types of data that the big credit bureaus have to buy. Oftentimes, reporting companies like LexisNexis will sell credit information such as bankruptcy records and government tax liens to the big credit bureaus. The credit bureaus also seek out information from public records to collect information on any repossessions, bankruptcy filings or foreclosures you may have undergone. Usually, common consumer accounts like utilities and rent won’t show up on your credit report unless you make late payments that consequentially turn into a debt collection issue.
- They share it with each other: Yes, sometimes these three competing credit bureaus do share information with each other, but not like you might think. There are certain instances in which the credit bureaus are required to share information with one another. An example of this is when a consumer experiencing identity theft places an initial fraud alert through only one of the credit bureaus. The credit bureau that receives the fraud alert must then notify the other two bureaus.
So, what information are these credit bureaus collecting?
- Information surrounding your identity including your name, birthdate, Social Security number and past and current addresses.
- A list of your credit account history including your current accounts.
- Payment history; record of whether or not you’ve paid on time.
- Missed payments, collections accounts, bankruptcies, repossessions, and foreclosures. These are considered negative marks, but they aren’t permanent. After seven years, they are usually removed from your report.
- A record of who has pulled up your credit report. For example, the times that you have applied for credit or have been screened for preapproval will usually be included on this record.
Why your credit score might not show up on your credit report
By law, the credit bureaus must make the information in your credit reports available to you, however that doesn’t necessarily include your credit scores.
Out of the several different types of credit scores, there are two that are the main players in the game: FICO and VantageScore.
Both of these data analytics companies generate your credit score by taking the information from your credit reports and running it through an algorithm they each have created. Since their algorithms are not exactly the same and both companies have probably acquired different sets of data, your credit score might vary depending on the scoring model that was used.
How to get credit reports from each credit bureau
As a consumer, you have a right to obtain a free annual credit report from each of the three main credit bureaus.
Use this as an opportunity to look over your reports and check if there are any mistakes. It’s in your best interest to check your credit report carefully for identification mistakes and/or incorrect account information. Mistakes like these could be causing harm to your credit if they exist, so you’ll want to take care of this right away.
Since each of the three major credit bureaus work separately from one another, it’s important for you to check all three.
How to take care of mistakes on your report
Mistakes on your credit report can mean a lot of things, whether it’s an innocent mishap or a case of identity theft. Fortunately, if you find a mistake on your credit report, you can dispute it.
Disputing an error on a credit report means that you will need to file a formal complaint that the bureau must legally respond to. However, each bureau’s error disputing process is a little different, which is why it’s important that you check all three reports.
If you find that the same mistake is on all three reports, it’s extremely important that you file a complaint with all three bureaus as credit reporting companies do not share this information.
Listed below are the links to dispute an error:
Other Important Credit Bureaus
Experian, TransUnion and Equifax are the main three players in the credit bureau game, but other credit bureaus do exist. See the Consumer Financial Protection Bureau (CFPB) for a listing of dozens of consumer credit bureaus categorized based off of the type of information that they collect and make available to creditors.
If you’re interested in learning more about these different credit bureaus and what they do, take a look at the CFPB website for a full listing complete with their phone numbers and addresses.
These are three credit bureaus you may also want to familiarize yourself with:
- ChexSystems: Focuses on gathering and reporting information on closed checking and savings accounts.
- National Consumer Telecom and Utilities Exchange (NCTUE): Focuses on gathering and reporting information on the utility industries, telecommunications, and pay TV.
- Comprehensive Loss Underwriting Exchange (C.L.U.E.): This bureau is owned and operated by LexisNexis and focuses on collecting information related to insurance and create consumer auto and personal property reports. This information could be used by insurance companies when coming up with an insurance premium.
Credit bureaus exist and they play a major role in our credit score. Whether they are one of the major three or they are a smaller credit bureau, there are several different credit bureaus using a broad selection of sources to gain information and put together credit reports.
The data and algorithms used to calculate your credit score vary from credit bureau to credit bureau, which is why your score might look slightly different at times.
Go online, mail in, or call the credit bureau to request a report. If you find an mistake on one of your reports, you can file a claim and the credit bureaus are legally required to evaluate and correct the error as necessary.
Some of these credit bureaus offer free credit reports, but you may need to submit a mail-in request or call to request your report.