How They Work and What They Know About You

Equifax, Experian, and TransUnion are the three major credit reporting agencies in the United States. These are private companies that collect and sell data on the spending and borrowing habits of individual consumers. The data is compiled into a credit report on each individual, with a score that rates the individual's creditworthiness on a scale from “poor” to “excellent.”

Whether a person's application for a credit card, mortgage, car loan or lease is approved and at what interest rate depends largely on the person's credit score with one or more several of these credit bureaus.

Key takeaways

  • The three major credit bureaus in the United States are Equifax, Experian, and TransUnion.
  • They compile credit reports on individuals, which they sell to potential lenders and others.
  • The three bureaus may have somewhat different information in their reports, depending on which creditors provide it to them.
  • The information in your credit reports is also used to assign you credit scores.
  • Credit bureaus are not the same as credit rating agencies, which evaluate the finances of companies and countries.

What are credit bureaus?

Credit reporting agencies compile each consumer's credit history, primarily to allow potential lenders to evaluate their creditworthiness. Other businesses, such as potential employers and utilities, also check credit scores regularly.

There are slight variations between bureaus, but credit scores are always three-digit numbers, typically 300 to 850. Scores are derived from information in the full credit report, including payment history of the person, the amount of the unpaid debt, the duration of the credit. history, credit mix and number of recent requests for new credit.

The overall score and credit report details are used to determine if the person qualifies for additional credit, how much will be loaned, and what the interest rate of the loan will be.

Regulation of credit bureaus

Credit reporting agencies are regulated by the federal Fair Credit Reporting Act (FCRA), which defines how they can collect, disburse, and disclose consumer information.

The bureaus rely on information provided by the banks, financial companies, retailers and sometimes the landlords you deal with.

The 3 best credit bureaus

In the United States, the three major consumer reporting bureaus are Equifax, Experian, and TransUnion. This trio dominates the market for collecting consumer information in credit markets.

  • Equifax. Headquartered in Atlanta, Equifax has approximately 14,000 employees and operates in 24 countries. In the United States, it dominates in the Southern and Midwestern states. It claims to be the market leader in most of the countries where it operates.
  • Experienced. Headquartered in Costa Mesa, California, Experian initially only managed reporting for the Western United States. The company now employs approximately 21,700 people in 30 countries and is headquartered in Dublin, Ireland.
  • TransUnion. Chicago-based TransUnion, founded in the 1960s, has regional offices in Hong Kong, India, Canada, South Africa, Colombia, the United Kingdom and Brazil and employs more than 10,000 people.

How the credit bureaus collect information about you

All three credit reporting agencies collect the same basic information about consumers. This includes personal data such as name, address, social security number and date of birth. It also includes credit history, including debts, payment history and credit application activities.

Lenders will generally report payments that are at least 30 days late to one or more credit bureaus.

How overdue invoices are recorded

If you are late on a student loan payment, Sallie Mae can report it to a credit bureau. generally when it is 45 days late. Federal loans offer more leeway, allowing 90 days to pass before the loan servicer files a default report.

The Internal Revenue Service (IRS) does not report income tax payments or delinquent taxes to the bureaus. However, if a taxpayer fails to pay their tax debt within a reasonable time, or owes significant back taxes, the IRS may file a federal tax lien (a legal claim against a taxpayer's property) with from the local county clerk's office. A tax lien filing is considered public information and offices can find it through third-party searches.

Not all lenders report their credit activity to each credit reporting agency, so the credit report from one agency may differ from that of another credit reporting agency. Even when lenders report to all three bureaus, their information may appear on credit reports at different times simply because the bureaus compile data on different schedules.

You are entitled to free copies of your credit reports from the three major bureaus at least once a year. You can request them on the official website provided for this purpose: Annual Credit If you find any errors, you have the right to dispute them and the credit reporting agency is required to investigate.

How Lenders Use Credit Reports

Let's say you apply for a loan, line of credit, or credit card from a bank or other lender. This lender will almost certainly run a credit check, requesting a report on you from at least one of the three major credit bureaus.

Most lenders refer to a single report from a single credit bureau to determine an applicant's creditworthiness. Mortgage companies are one of the exceptions. A mortgage lender reviews reports from all three credit bureaus because of the large amount involved.

All of these credit inquiries are noted on your credit report from the bureau that receives the inquiry. At least in the short term, the application itself can affect your credit score because it reflects your intention to access additional credit.

The information in your credit reports is used to calculate your credit score. The two main credit scoring companies are FICO (formerly Fair Isaac Corp.) and VantageScore. Their scores are calculated based on proprietary models and may differ depending on the type of loan you are applying for.

Credit rating agencies and credit bureaus

Credit bureaus and credit rating agencies are not the same thing. Credit rating agencies collect credit history information from businesses and governments, not individuals. This information is used to assess the creditworthiness of companies and governments seeking to borrow money by issuing bonds or preferred stocks.

The main credit rating agencies are Fitch Ratings, Moody's and S&P Global. These agencies research and analyze a company's financial data and assign a business credit rating. Ratings are intended to provide investors with information about the financial stability of issuers of debt-based investments. The agencies also rate debt and fixed-income securities issued by companies.

AM Best, another major rating agency, focuses on the insurance industry.

Credit ratings are issued in letter form, such as AAA or CCC, so that investors can quickly assess the risk level of a debt security. Ratings differ between the three major agencies, so it is important to understand which one provides the letters.

Credit scores are based on many variables, ranging from business attributes to underlying investments, but all are designed to assess the likelihood that a borrower will be repaid.

Which of the 3 credit bureaus is best?

Of the three major credit reporting agencies (Equifax, Experian, and TransUnion), none is considered better than the others. A lender may rely on a report from one or all three bureaus to make its decision regarding loan approval.

Which bureau's credit report is most accurate?

Each of the three credit reporting agencies may collect slightly different information, depending on which of your creditors reports your transactions to them.

Inaccurate or incomplete information may appear on one, two, or three of your reports, so it's worth checking them periodically, especially if you're about to apply for a large loan such as a mortgage.

What information is not in my credit report?

Your credit report does not include your marital status, medical history, purchasing habits, income, bank account balances, criminal record, or education level. The report itself doesn't even include your credit score.

There are many ways to get your credit score for free. You can sign up for free credit monitoring services from a site like Credit Karma or Credit Sesame. Some credit card companies display your score upon request when you log in to their websites. The information may be weekly rather than updated, but it is sufficient for a routine check.

The essential

The three major credit bureaus in the United States operate similarly, in that they all provide information about individuals to creditors. However, there are differences in their credit assessment methods and the information that can be provided to them.

If you are applying for credit, consider obtaining copies of your credit reports beforehand and reviewing them for any errors.

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