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You may have heard about the three major credit bureaus (Equifax, Experian, and TransUnion) and how these institutions have a big impact on each person’s credit score. This may lead to the common question: What is a credit bureau?
The main job of a credit bureau is to gather the necessary information used to generate credit scores. Credit bureaus have a large impact on lending decisions but don’t make the decision for lenders.
- Credit bureaus collect financial information and then use it to generate credit reports and credit scores.
- The three main credit bureaus here in the United States are Equifax, Experian, and TransUnion. There are a few lesser-known bureaus as well.
- Consumers are able to get a free copy of their credit report from each credit bureau each year.
How Do Credit Bureaus Work?
Credit bureaus are also referred to as credit agencies and they collect information from creditors and lenders to generate credit reports and scores.
The role of a credit bureau is to gather information from your creditors such as your credit card companies or lenders to contribute to your credit score which is based on a variety of factors.
Credit bureaus are neutral and report both good and bad information regarding your loan payments, borrowing history, an hard credit inquiries. The information that a credit bureau collects shows up on your credit report which is a statement or summary of all your credit activity in one place.
While lenders typically look at your credit score, anyone can access their credit report to see the information the credit bureaus have collected and how this directly impacts their credit score.
Where Do Credit Bureaus Get Their Information
Credit bureaus generally get their information from two main places.
- Creditors and lenders: Most creditors and lenders report your account and payment history to the three major credit bureaus each month. Some lenders don’t report to all three bureaus, so it doesn’t hurt to ask and confirm where your payments are being reported to. For most people though, any time they open a loan account or credit card, it will show up on their credit report and could impact their score. Lenders and creditors are one of the main sources of information for credit bureaus.
- Public records: Sometimes, credit bureaus also get information via public records which can be the case for liens, bankruptcy filings, and court judgments from public records providers.
Keep in mind that not all credit bureaus will have the same information. Each credit bureau operates independently so one may have information on an account of yours that another credit bureau does not. This is why it’s helpful to check your credit score with all three of the major credit.
What Information is Included in Your Credit Reports
Your credit report breaks down your credit score and the score details. You have the option to look up your credit report for free on websites like Credit Karma and Credit Sesame. Credit Karma will have your score from two of the three major credit bureaus.
Generally, your credit report includes details such as your:
- Credit card balances
- Mortgage details
- Student loans
- Auto loan
- Personal loan
- Hard credit inquiries
- Total length of credit history
- Payment history for each of your accounts
- Any missed payments, collections, or delinquent accounts
- Any judgments such as a bankruptcy within the past few years
Your credit report may also include information like your address, past or current employer, and who you’ve applied for credit with during the past two years.
Some information on your credit report may fade off and expire after some time. For example, if you pay off a car loan, the account won’t remain on your credit report after some time. Bankruptcy remains on your credit report for seven to 10 years and hard inquiries remain for about two years.
As new information gets reported to the credit bureaus, your credit report is constantly changing and as a result, your credit score will change too.
Who Uses The Information Included on Credit Reports?
Credit reports are used by lenders or creditors to see if you meet their borrowing requirements. This include:
- Credit card companies
- Mortgages lenders
- Auto lenders
- Private student loan lenders
During the application process, lenders will ask for your social security number in order to check your credit score.
Each lender has its own eligibility standards and may require a specific credit score. Borrowers with a lower credit score face more challenges in getting approved since lenders view this as a higher borrowing risk.
The Three Main Credit Bureaus
The three main credit bureaus are Equifax, Experian, and TransUnion. These are the most popular credit bureaus that lenders commonly report to. These credit bureaus do not work together, but rather, operate independently of one another.
However, all three generate FICO credit scores and even VantageScore credit scores. The VantageScore model was actually created by the credit bureaus in 2006 and is currently used by 3.7 billion card issuers.
The Equifax credit bureau was founded in 1899 by Cator and Guy Woolford. It was started under the name Retail Credit Company in Atlanta Georgia. Just 20 years later, the company has multiple offices throughout the United States and Canada focusing on collecting data from consumers.
The company changed its name to Equifax in 1975.
Experian credit bureau started in 1996. Early on, the company knew it wanted growth plans to focus on a few areas: fraud prevention, collections, risk management, authentication, and marketing.
In 2017, Experian made negative headlines for having to pay out a $3 million fine for dispersing false credit information to various consumers. Despite this, Experian is still a trusted and widely used credit bureau that has since recovered from past mistakes and errors.
The TransUnion credit bureau was founded out of Chicago in 1969. After acquiring the Credit Bureau of Cook County back in 1969, TransUnion became the first credit reporting agency to do automated tape-to-disc transfers. This change made it easier to update consumer files.
TransUnion has continued to expand over the years and in 2017 it purchased a majority stake in CIBIL which is India’s leading credit information company.
How to Contact the Major Credit Bureaus
Each credit bureau makes it easy to contact someone with several options. If you have questions or want to file a complaint or dispute something that’s on your credit report, use the contact information below.
For general questions, you can reach out to Equifax either Online or by calling 1-888-378-4329.
Customer service hours are from Monday to Friday between 9 am-9 pm EST, or Sat-Sun between 9 am-6 pm EST. For more specific questions you can either submit them in the Dispute portal or Fraud Alert portal.
With Experian, you can address your questions by phone at 1 888 EXPERIAN (1 888 397 3742).
Experian cannot accept disputes via email. They have specific instructions for making a Dispute or reporting Fraud and Identity Theft.
For TransUnion credit monitoring, customers can call 1-833-806-1626 from Monday to Friday 8 a.m. to 9 p.m. EST, or Saturday and Sunday 8 a.m. to 5 p.m. EST.
TransUnion makes it easy to dispute anything that doesn’t seem right on your credit report. Fraud alerts can be added through the site and can include a 1-year, 7-year, or active duty military. Those can be added or removed here.
Other Credit Bureaus
There are close to 40 other credit bureau check options aside from the three major credit bureaus. These credit bureaus are much smaller though so the information they track does vary between companies.
Early Warning Services
EWS will provide information about you to banks and financial institutions but not provide a credit score. In 2017 early warning services became the parent company of Zelle.
Innovis was started in 1970 and is considered the fourth-biggest consumer credit reporting agency in the nation. They have a headquarters in Colombus, Ohio. Innovis focuses on credit reporting that includes things like your personal information and previous or current mortgage accounts.
Many of these alternative bureaus put focus on specific areas like background checks, motor vehicle records, rent payments, utility payments, and more.
Who Oversees The Main Credit Bureaus in the United States?
These main bureaus are subject to federal law. They are regulated by the Fair Credit Reporting Act (FCRA), and part of the work they do is to make sure the bureaus are reporting your consumer credit information timely, accurate, and fairly.
Credit Bureaus and Lending Decisions
These credit reports and scores help lenders make their lending decisions. Lenders use credit scores as one of several factors to decide whether to approve or deny an application.
Experian, TransUnion, and Equifax do not make lending decisions, but they gather the information for lenders and turn the decision over to them.
Your credit score is just one factor that impacts lending decisions. Lenders also look at your debt-to-income ratio, length of employment, and collateral if you’re applying for a secured loan.
Why Do I Have a Different Credit Score With Different Credit Bureaus?
Some lenders don’t report information to the three credit bureaus. Your credit report can be different across the main bureaus.
Also, each of these bureaus may use slightly different credit scoring models. While FICO and VantageScore are the two most common credit scoring models, they each have several versions.
Your credit score may also be different depending on what your lender is using to pull your credit score. If you’re applying for a car loan, the lender may look at your auto credit score and you will see something different if you check your credit score using an online tool like Credit Sesame or Discover Scorecard.
How to Check Your Credit Report and Credit Score
You are entitled to at least one free credit report from each credit bureau each year. You can go to AnnualCreditReport.com to access your free credit report every 12 months. Some online sites such as CreditKarma also provide a free credit score but this may not include your score from all three major credit bureaus.
While sites like Credit Karma and Credit Sesame may show you your credit score for free each month, you may need to pay to see your full credit report. Sometimes, credit card companies can provide you with your free FICO score monthly or quarterly.
How To Improve Your Credit Score
While you can’t control the factors that impact your credit score, you can practice healthy financial habits and manage debt well to improve your credit score.
Here are some key ways to improve your credit score.
- Don’t miss payments. Your payment history makes up at least 30% to 35% of your credit score. Making on-time minimum monthly payments can help you keep a positive payment history and improve your credit score. Try to set reminders or automatic payments so you don’t ever miss a payment.
- Limit how often you fill out credit applications. The amount of hard credit inquiries can also negatively impact your credit score if you obtain several inquiries in a shorter timeframe. Limit how often you apply for credit and allow hard credit inquiries to fall off your report after two years.
- Apply for credit-building products. Consider applying for credit building products such as credit builder loans which allow you to make regular payments that get reported to the three major credit bureaus.
- Recieve credit for utility and rent payments. Some credit scoring models allow you to build your credit with payment history for utility and rent payments. While the three major credit bureaus do not accept direct payment information on these expenses, options like RentReporter and Experian Boost allow you to use this payment information to improve your credit.
- Catch up on past-due accounts. Paying down existing debt is another way to improve your credit score. Limit your spending and create a budget that prioritizes debt payment. Since your total debt amount is a factor that impacts your credit, lowering this amount will cause your score to increase.
- Ask for higher credit limits. Some credit cards offer to increase your credit limit so long as you’re making on-time payments and are in good standing. Increasing your credit limit can lower your total utilization if you continue to limit card spending.
- Manage your credit utilization. As a general rule of thumb, you’ll want to keep credit card balances at or below 30% of your total credit limit. This means if your credit limit is $1,000, try not to spend more than $300 on your credit card. The higher your credit utilization rate, the lower your score.
- Don’t ignore your collection accounts. Continue to pay on collection accounts and negotiate a reasonable payment plan if you can.
- Dispute any credit report errors you see. Try to review your credit report every six to 12 months to see if there are any errors or inaccurate information. You can report all errors to each of the three major credit bureaus and file a dispute.
- Use a secured credit card. Secured credit cards are great options for rebuilding your credit since the card issuer reports your payments to the three major credit bureaus. Typically, you’ll need to make a $200 to $300 deposit which will serve as your initial credit limit. After several months of using the card wisely, you may qualify for a credit limit increase or be able to upgrade to an unsecured credit card.
- Become an authorized user. If you have a friend or relative with excellent credit, see if they can add you as an authorized user to one of their credit cards. This can give you an extra boost to rebuild positive credit history for yourself.
Credit bureaus are important because they gather credit information on each person to help generate credit reports and credit scores. Without the data collection provided by credit bureaus, lenders wouldn’t have anything to reference when evaluating risk while considering an applicant.
Knowing how credit bureaus work can help you take the necessary steps to improve and maintain a good credit score. Focus on paying bills on time, limiting your total debt amount, and not collecting too many hard inquiries.
Also, be sure to check your free annual credit report every 12 months to make sure all your information is accurate.