You are probably aware of Equifax, Experian, and TransUnion, the three big consumer credit bureaus. These agencies — and others like them — collect and keep a range of information about you, your financial records, and history. They use this data to generate your credit report, which lays the foundation for your various credit scores.
Every credit reporting company vies for lenders’ business, so they use information from a specific agency when determining a potential applicant’s creditworthiness.
Credit Karma explains what you need to know about the credit bureaus and how they collect and use your information to generate your report.
What Information Goes On Your Credit Profile?
Your credit report reflects your borrowing history. To create your account, each credit reporting agency gathers several important pieces of data, including:
- Your credit account details: This includes your credit mix, such as credit cards, personal loans, home loans, etc., as well as each accounts’ open date, credit limit, outstanding balance, and payment history.
- Hard and soft credit pulls: Lenders and other entities perform hard credit inquiries when they check your history, which temporarily affects your score. A soft pull occurs when you review your credit reports yourself. It does not impact your credit.
- Bankruptcy: If you filed for bankruptcy, your record would show when you did and what chapter you filed under.
- Collection accounts: If you defaulted on a loan or credit card bill and the lender sells your debt to a collections agency, this will also appear on your profile.
In addition, your report contains personal details such as your name, address, Social Security number, and birthday.
How Are Your Credit Reports Used?
Your credit report is the basis for your overall rating. Your score can differ depending on the credit scoring model used to calculate it, even if the report’s information is the same. FICO and VantageScore are the primary scoring models. They review five factors to figure your score:
- Payment history
- Credit usage
- Credit history
- Credit mix
- Recent credit
Banks, credit card providers, and other entities use your credit report to determine your creditworthiness, which is your perceived ability to repay a debt. The credit agencies could also include these factors when generating your credit score.
How Does Each Credit Bureau Receive Your Information?
Credit agencies get your data from several sources.
- Information reported by creditors: Many banks and credit card providers report your payment activity to the credit bureaus.
- Information bought from other bureaus: Some pieces of data, like bankruptcy records or tax liens, are purchased by credit reporting companies. For instance, one agency could buy publicly available information from ChexSystems, another bureau, to include it when creating your profile.
- Information shared among other bureaus: Even though each company competes for creditors’ business, they also share consumer data. For example, if you report a fraud alert with one company, that agency must tell the others.
Why Does Each Agency Have Different Reports And Scores?
When you order your credit report, you might see that each agency gives you a different score. There are a few reasons for this, but one is that creditors don’t always update every bureau. That can leave you with one report that is more accurate than the others. Since your account is the basis for your credit score, your rating can vary considerably based on which agency’s report is used.
Your FICO and VantageScores can also differ as well — even when using the same report from the same agency. That’s because each model weighs different variables in its own way.
What Other Credit Bureaus Should You Know About?
The Consumer Financial Protection Bureau has nearly 50 credit reporting companies listed on its database. You can visit this list to find each agency’s website and contact details, plus short explanations of how they work and whether you can check your report for free.
Besides Experian, Equifax, and TransUnion, here are the other three companies that are worth learning about.
- ChexSystems: ChexSystems gathers and shares data about closed bank accounts.
- National Consumer Telecom and Utilities Exchange: This agency collects and reports data for utilities, cable, and telecommunications companies.
- Comprehensive Loss Underwriting Exchange (CLUE): This agency is owned and run by LexisNexis and gathers details for insurance companies who use it to determine your premiums.
Equifax, Experian, and TransUnion use a broad range of sources to generate your credit profile. These reports help FICO, VantageScore, and other models determine your credit score. It’s common for ratings to differ across scoring models and credit agencies.
Make a habit of checking your credit report regularly. This way, you can catch errors and resolve them before it becomes a bigger problem. By law, the credit agencies must fix mistakes if they discover one.
- DeNicola, Louis. “The 3 Credit Bureaus: Why They Matter.” Credit Karma, 18 Nov. 2020, www.creditkarma.com/credit-cards/i/three-credit-bureaus.