What are Credit Reporting Agencies?
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Key points about: credit reporting agencies
Experian®, Equifax, and TransUnion are known as the three major credit reporting agencies, but they’re not the only ones.
Credit reporting agencies collect your credit information from various sources, compile it into a report, and sell it to lending companies.
It’s important to review your credit report from all three main credit reporting agencies, as your credit information can vary.
A credit reporting agency, also known as a credit bureau, is a company that collects your credit history from various financial institutions and uses this information to create a credit report. There are three main credit reporting agencies in the U.S.–Experian, Equifax, and TransUnion.
What do credit reporting agencies do
A credit reporting agency collects your information from financial institutions, collection agencies, and public records, and uses the information to compile a credit report. Credit reporting agencies sell your credit information to banks, lenders, and other companies, who use it when deciding if you meet their eligibility criteria for something like a loan or credit card.
For instance, when you apply for a new credit card, the lender will review your credit report to assess how you manage your finances. This will help them to decide if they want to extend you credit.
In addition to credit card issuers, there are other entities that can see your credit reports and may use them to inform decisions, according to the Consumer Financial Protection Bureau.
Entities who may request your credit report include:
Issuers for a credit card, student loan, payday loan, personal loan, car loan, or a mortgage, etc.
For employment screening, but only if you provide written consent.
To determine eligibility for government benefits or licenses.
For tenant screening.
For home, life, or property insurance screening.
When applying for electricity, gas, water, or a new phone.
You’re also able to request a copy of your report and credit score from a credit reporting agency for your own information. According to the Federal Trade Commission, the Fair Credit Reporting Act, a federal law, provides the right to a free copy of your credit report every 12 months from each major credit bureau. And as of October 2023, everyone in the U.S. can get a free credit report each week from the three main credit reporting agencies by visiting AnnualCreditReport.com.
Remember, requesting your free credit report will not hurt your credit score
The information contained in credit reports from one of the big three credit reporting agencies can include:
Name, date of birth, address, employer, etc.
From credit card companies, lenders, and other creditors.
How much credit you have and use.
From debt collectors, which can include unpaid medical debt over $500, according to the Consumer Financial Protection Bureau, or past due phone bills.
For example, if you’ve filed for bankruptcy.
A list of creditors that have asked for your report when you apply for credit.
How do the three credit bureaus update their information?
Credit bureaus update their information in a variety of ways. They may get new information from creditors, such as credit card issuers or mortgage lenders.
Financial information may also come from public records, such as bankruptcy filings or foreclosures.
The credit bureaus also sometimes share information with one another. This happens when you place a fraud alert with one of the bureaus. The bureau is required to inform the other two bureaus of the alert.
Why are scores from credit bureaus different?
It’s normal for credit bureaus to have varying credit scores, because creditors don’t always share the same information with the same credit reporting agencies.
For instance, a lender might only report a new credit inquiry to Experian, one of the three major credit bureaus. In this case, this credit inquiry won’t show up on an Equifax or TransUnion credit report.
Also, each credit bureau may use its own credit scoring model, which weighs financial factors differently. For example, your history of making on-time payments might be the most important factor in one model, while another scoring model may weigh your current credit availability and usage as the most important.
The credit bureaus may also differ in how far back in the past they examine your credit history.
So, when you review your credit reports, it’s completely normal to see scores that may be slightly different. It’s when the scores vary by a large amount that you may want to review them closer to see if one contains an error that is drastically affecting the score.
The three major credit reporting agencies
You’ve likely heard of the three main consumer credit reporting agencies in the U.S.–Experian®, Equifax, and TransUnion.
Each major credit reporting agency collects the same type of information, but they may get it from different lenders and entities, and the information may be shared with them at different times.
A variation in your credit score can impact whether or not a lender decides to extend you credit. This is why you should review your credit report from all three of the major agencies.
Are there only three credit reporting agencies?
While TransUnion, Equifax, and Experian are the three main credit reporting agencies in the U.S., they’re not the only ones. The Consumer Financial Protection Bureau provides a list of many of the consumer reporting agencies available in the United States. The big three agencies provide nationwide reporting, while many of the other, smaller reporting agencies focus on certain market areas or consumer segments.
For instance, some reporting agencies focus exclusively on employment screening, providing background information to employers and non-profit volunteer organizations. Others target tenant information, providing your credit history, past evictions, and criminal background data to landlords and property management companies.
There are also agencies that provide credit information to banks to help them decide if they should offer you a checking account or allow you to cash a check. Medical screening agencies report your medical information to insurance companies (with your consent) to help insurers assess your risk and eligibility.
Other specialized credit reporting agencies monitor and report information in the areas of retail, personal property insurance, utilities, and more. Ultimately, the credit agency used will depend on the type of approval you’re trying to obtain.
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