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3 Major Credit Reporting Agencies

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To many American consumers, the three major credit bureaus — Experian, Equifax and TransUnion — must seem like confusing and unexplainable financial force.

The “Big Three” credit reporting bureaus gather data on our spending and payment habits, toss it into some sort of logarithm blender and what emerges is used to judge how responsible we are with our finances.

And at every corner of that process, there are questions.

How does this process work anyway? Who’s pushing the buttons? And more importantly, who’s minding the gate where all this information is stored?

This page will explain how the credit bureaus operate, how they steer our financial lives and what to do when you spot an error on your record.

Who Are the Big Three and What Are They Doing?

Those questions were raised in 2013, when the CBS news magazine, “60 Minutes” did a report on consumers hopelessly attempting to get misinformation removed from their credit reports.

The “60 Minutes” reporters showed that there were mistakes on 40 million consumers’ credit reports and that half of that group had “significant errors.  The investigators from “60 Minutes” reported that it was “nearly impossible’’ to get those mistakes removed from the record and consumers were outraged.

Then, in 2017, a data breach at Equifax exposed the personal information of more than 145-million consumers and critics of the “Big Three” had a field day.

One Congressman likened it to the guards at Fort Knox failing to lock the gates and not noticing that thieves were looting the vaults.

The credit bureaus all pledged improvement in due diligence, attention to detail and customer service, but with more than one billion pieces of data updated every month, it’s not a surprise they can’t keep up. If anything, the episodes spotlighted their magnitude and power.

How powerful? Experian, Equifax and TransUnion have financial and personal records on more than 200-million American consumers, anointing each of them as a good, mediocre or poor credit risk.

Their interpretation could help you or prevent you from getting a mortgage. It could cost you a small fortune in interest from a car loan, or help you secure the best rate available. It might mean the difference in getting a job or receiving a security clearance.

What Is a Credit Bureau?

Credit bureaus are the entities that collect and maintain financial information on all consumers. That data is used to develop reports about each consumer’s spending and payment habits. The information also factors into how consumers’ credit scores are calculated.

The credit reports are used by banks, credit card companies and other lenders to determine the quality of a consumer’s credit worthiness. It’s probably the biggest factor in whether anyone can purchase a home or car. So yes, it is extremely important.

It’s important to note that Experian, Equifax and TransUnion are for-profit companies. They are not affiliated with the U.S. government or any educational institution. They provide a service to banks, lenders and individuals, who pay fees to the credit bureaus. In 2017, the three major credit bureaus collectively earned $4 billion.

How Do the Credit Bureaus Make Money?

They gather information about you from businesses, aggregate it, then sell it back to them. They know your mortgage loan totals, how much you owe for college, when you acquired a credit card.

A credit-card company, for example, could purchase a list of potential customers, 30 to 35 years old, with credit scores above 670. With that information in hand, it could then send pre-approved credit-card mailings, making it easier to sign up new customers from a targeted population.

Another revenue source is potential employers. According to a 2012 report by the Society for Human Resource Management, about 45% of companies (with 2,500 to 24,999 employees) do background credit checks on job applicants. Credit scores are off-limits for employers, but legal judgments and bankruptcies can be detected.

The credit bureaus combine a detailed history of a borrower’s transactions and payments with analytics on the way an individual handles certain types of debt. Lenders decide whether to issue a loan based on a consumer’s borrowing habits, credit history and estimated ability to pay bills. That data also determines how much to lend and what interest rate to charge when loan terms are negotiated.

Credit reporting began in the early 1900s, when lenders were scattered across communities with little information exchanged.  Lenders faced huge risks because customers could default on a loan then go across town and get another loan with no penalty. Lenders decided to start keeping records and share them with each other so everyone would know which consumers were good credit risks and which were bad risks.

When lenders needed a credit report, they contacted the closest credit agency. Over time, as credit reporting became automated, local credit agencies were consolidated into regional entities — TransUnion (Central U.S.), Experian (West) and Equifax (South and East). Each company now has a national presence, but they are not the only credit bureaus in operation.

There are more than 400 regional or industry-specific credit bureaus in the U.S. They offer specific information about things like renting, employment and medical debts.

Altogether, credit bureaus make an estimated 36 billion updates using data from 18,000 sources a year.

How Do Credit Scores Work?

A consumer’s credit score is a reflection of a mathematical formula that’s based on the information in your credit report. It’s a way to quantify your projected reliability in paying back car loans, credit-card balances, mortgages and other lines of credit.

The FICO score, created by the Fair Isaac Corporation in 1958, is the most widely used credit score. It’s a three-digit number, ranging from 300 to 850 (higher is better). Another credit score, the VantageScore, has been used since 2006, and it has the same scoring range as FICO.

The FICO and VantageScore ratings take into account the following:
  • On-time payment (35% of your score). It’s the most important factor in determining your score. If nothing else, at least pay the minimum due, on time, every month.
  • Use of available credit (30%). It’s simple: The lower the percentage of available credit you use, the better your credit score.
  • Length of credit history (15%). Your experience using credit and making payments is important. For example, the longer you use a specific credit card, the more it helps your score.
  • Mix of accounts (10%). It’s a positive to see consumers manage payments on mortgages, student loans, revolving credit and auto loans. It shows you can handle various forms of credit and will be less of a risk for lenders.
  • New credit (10%). The number and types of accounts you have opened recently.

You credit score can change regularly — even on a weekly/monthly basis — depending on your use of credit and payment schedule.

How Do Credit Bureaus Get Your Information?

Each time you pay your credit-card bill, mortgage, auto loan or insurance premium, that information is forwarded by your creditor to the three credit bureaus (and other specialty bureaus that compile similar data).

If you miss a monthly payment, that information also is passed along to the credit bureaus. That gives a complete picture of your financial transactions, along with short-term and long-term success (or failure) to meet those obligations in a timely manner.

Here are the main ways that credit bureaus get your financial information:

Reported Information: Creditors (known as “data furnishers’’), such as banks and credit-card issuers, auto loan companies, report information about their accounts and customers to the credit bureaus.

Purchased Information: A credit bureau can buy data and use the information when generating your credit report. Examples: A consumer credit bureau could buy public records information from LexisNexis or another credit bureau. It could buy government tax liens or bankruptcy records.

Shared Information: Technically, they are competitors. But sometimes, the credit bureaus must share information. A prime example is when an initial fraud alert is placed with one of the bureaus. In that case, it’s required to forward the alert to the other bureaus.

Credit card fraud and identity theft cost the U.S. economy $16.8-billion in 2017 (an increase of 3.2% from 2016), according to Javelin Statistics and Research. The rise of embedded chip credit cards has helped to some degree in point of sale purchases, but much of the fraud has shifted online.

If there is suspicious activity on one of your credit accounts, it’s best to call the help lines at Experian, Equifax or TransUnion. The bureaus generally send fraud alerts to consumers, asking them to confirm your identity before credit is extended. The fraud alert will go to other national credit reporting companies.

If a fraud alert has been sounded, it could cause the following actions:
  • You won’t be approved for new credit.
  • You have to present identification every time you use credit.
  • You will receive a complimentary credit report, which should be reviewed to find fraudulent data.
  • The credit bureaus will investigate and confirm the fraudulent data, then remove it from your credit report.

Who Requests Credit Reports and Scores?

A surprising number of businesses are interested in your credit report and score. Good credit scores are viewed as indicators of reliable and responsible financial behavior.

When a business does a credit check, they can make a “soft pull’’ or a “hard pull’’ on your credit report. “Soft pulls’’ are involuntary inquiries during a background check. They don’t affect your credit score.

“Hard pulls’’ are considered voluntary inquiries, things like when you apply for a credit card, mortgage or auto loan.

Unauthorized hard pulls by a business can negatively impact your credit score. But you can ask the credit bureaus to remove it because the inquiry was made without your consent.

The credit-card industry has the most interest in your credit report because it supplies a temporary loan each time you use on its cards. The other obvious businesses interest in your score (and your ability to repay loans) are mortgage brokers, auto dealerships and banks.

Some of the less-obvious businesses include insurance companies, employers, landlords, utility companies, licensing agencies, collection agencies and child support enforcement agencies. Each of them can file negative reports with credit bureaus if you fail to make timely payments on your accounts.

The insurance industry says there is statistical proof of a direct correlation between drivers with low credit scores and frequency/severity of accidents (as well as policy cancellations because of non-payment).

Employers can pull credit reports on prospective employees, but only with written permission. Additionally, the employer must make the employee aware that credit-report information is being used to evaluate them. If an employee refuses permission to pull a credit report, the employer could deny them the job. Employers use the information to determine trustworthiness, a prime quality for jobs at banks, jewelry stores, law enforcement agencies and government agencies.

Landlords use soft pulls of credit report to determine the reliability of a tenant (ability to pay rent and the amount needed for a deposit). Deposits are also used for utility companies.

Credit bureaus also sell personal information to qualified lenders trying to target loan offers to qualified prospects. These “prescreens’’ or “trigger lists’’ are considered by some as an invasion of privacy. But they are allowed under the Fair Credit Reporting Act (FCRA) because a tangible benefit (firm offer of credit) is received by consumers. But those consumers can opt out of the “prescreen’’ or “trigger lists’’ if they don’t want the offers.

How to Dispute Inaccurate Information

You have the right to dispute inaccurate information in your credit report. Under the Fair Credit Reporting Act (FCRA), the credit bureau (and the company that furnished the information) must conduct a free investigation to verify the information. If a mistake is found, it must be corrected.

You could dispute information over the phone, but mail and electronic dispute are preferable so you can establish a paper trail. From the Consumer Financial Protection Bureau, here is the CFPB list of credit bureau contact information.

Need some suggestions on how to get started? From the Federal Trade Commission, here’s a sample dispute letter and some detailed instructions on how to report errors.

If the errors have not been corrected after you’ve disputed them in writing, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).

Why Do Reports Differ by Agency?

It might seem mystifying when your credit reports and scores are different. But the three major credit bureaus are independent. They generally don’t share information or communicate.

If an error appears on multiple credit reports, you must file a separate dispute with each credit bureau that is reporting the misinformation.

Why would the information be so different?

It’s possible that one credit bureau might have unique information captured on a consumer that isn’t captured by the other two bureaus. Each one has a speciality for which it is known. For example, Experian specializes in providing marketing services for businesses for use for pre-approved credit card offers. Equifax works with corporate credit analysis. TransUnion focuses on analyzing credit information on Americans living abroad.

Not are credit scores are “FICO’’ scores, so make sure you are comparing apples to apples. Also, make sure you are accessing the information at the same time because a “week-old score’’ at one bureau could be severely dated.

All of your credit information — supplied by lenders, collection agencies and court records — may not be reported to all three credit bureaus. Lenders report information to the credit bureaus at different times, so one bureau might have more up-to-date information.

instances where incomplete files or inaccurate data (social security numbers, addresses, etc.) cause one person’s credit information to appear on someone else’s credit report.

Other Credit Reporting Agencies

The Big Three credit bureaus (Experian, Equifax, TransUnion) are well known.

But there are other credit agencies that specialize in specific types or reporting, so they might be more appropriate for certain types of lenders or companies.

Some examples:
  • PRBC/MicroBilt serves predominantly subprime lenders who extend loans to low-income consumers with historically poor credit.
  • Innovis provides data that can help confirm your identity for fraud prevention and detection.
  • ChexSystems collects and reports information on closed checking and savings accounts.
  • The National Consumer Telecom and Utilities Exchange (NCTUE) collects and shares information for the telecommunications, pay TV and utility industries.
  • The Comprehensive Loss Underwriting Exchange (C.L.U.E.), owned and operated by LexisNexis, could be used by an insurance company to set your insurance premiums. It collects insurance-related information and creates consumer auto and personal property reports.

All told, there are about 40 alternative credit bureaus that specialize in background checks, banking, rental history, identity protection analytics, motor vehicle records, employment history, medical records and insurance history, among other things.

How to Get Credit Reports from Credit Bureaus

It’s important to review your own credit reports and credit scores, so you can correct any mistakes or errors to verify it’s an accurate representation of your credit history.

The Fair and Accurate Credit Transaction Act (FACTA) entitles every American to one free credit report — called a file disclosure — from each of the three major credit bureaus every 12 months.

To obtain a report, you can visit, which will direct you to the three credit bureaus. The report is free (beware of other sites that offer a report if you purchase another product or service). To learn your credit score, you must contact one of the three bureaus directly and pay a small fee.

You might find online sites and credit-card companies that provide a free credit score, but it’s usually not the same one seen by lenders. Instead, it’s referred to as an “educational score,’’ which means it’s close, but not exactly like the one seen by lenders.

Fair Credit Reporting Act Regulations

Under the Fair Credit Reporting Act (FCRA), the bureaus must correct or delete inaccurate or unverified information that appears on a credit report. After being notified, the bureaus have 30 days to comply. If the information has been verified as accurate, it can remain on the report.

But the ability of the credit bureaus to effectively resolve disputes with consumers remains a question. In 2017, the Consumer Financial Protection Bureau (CFPB) reported that 76% of consumers filed complaints about credit reporting, stating that they had incorrect information on their credit reports.

Credit bureaus must remove negative information from a credit report after seven years (it can be extended to 10 years if the consumer declares bankruptcy).

If any of the credit agencies or businesses that use consumer credit reports violate the regulations of the FCRA, they can be sued in state or federal court. Consumers can also put a block on their credit report to prevent unauthorized businesses from buying their personal financial information.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].


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