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What Are Credit Reporting Agencies and How Do They Work?
By Jamela Adam MONEY RESEARCH COLLECTIVE
Have you ever wondered what credit bureaus are and why they wield so much power?
Not only do they keep track of your payment history and outstanding debt, but they also assign you a credit score based on the aggregated data. As you’d expect, this information is used by lenders to determine whether you’re eligible for a loan, a mortgage, or a new credit card. But you may not know that employers, landlords, and insurance companies may also check your credit score and credit report before deciding whether to hire you, rent to you, or offer you a job. Some authorities even suggest that a low credit score might cause people to decide not to become romantically involved with you.
Without a doubt, credit bureaus’ influence extends well beyond our financial life. If you’re curious about how credit bureaus work, read on for an in-depth look at each of the three major credit reporting agencies. We’ll also answer some common questions about these powerful organizations.
How does a credit bureau work?
In a nutshell, a credit bureau — also referred to as a credit reporting agency — is a for-profit and publicly traded organization that collects and sells consumer credit information.
After gathering your credit information, credit bureaus generate credit reports, which lenders often use to make decisions about loan applications. Credit reporting agencies typically obtain this information about you from creditors and debt collection agencies. They can also acquire data about you from public records on file with county, state, and federal courts.
Credit bureaus assign you a credit score based on the credit history they’ve compiled. This includes information about your payment history, credit utilization, and outstanding debt. Keep in mind that your credit score can differ from one credit bureau to another. Here’s why: each credit reporting agency has its own method for calculating your FICO score and your VantageScore. So even if the information they have on you is identical, how they interpret that information can produce slightly different credit scores. Also, some creditors may only report to one or two of the credit reporting agencies, so you may have different accounts appearing on each of your three reports.
Every year, credit reporting agencies receive billions of dollars in revenue by selling credit reports and credit scores to lenders, employers, insurance companies and financial institutions to help assess credit risk. In fact, in 2021 alone, Experian, Equifax, and TransUnion generated $5.3, $4.9, and $2.9 billion respectively.
It’s important to note that credit reporting agencies are not responsible for determining your eligibility for a loan. They simply gather credit information and sell it to the loan provider. That data is then used by lenders to decide whether to offer you a loan, a credit card, or a mortgage and at what interest rate and terms.
What are the three credit reporting agencies?
There are three major credit reporting agencies operating in the United States: Experian, Equifax, and TransUnion. And though these three credit bureaus often receive similar consumer credit information from creditors, they aren’t affiliated with each other. Also, because they’re private corporations, they’re not responsible to voters or the general public – only to their shareholders
Experian
Experian manages the data of 1.4 billion consumers and 191 businesses worldwide, making it the largest credit bureau out of the three. The company was founded in 1996 and is headquartered in Dublin, Ireland. In addition to the United States, Experian operates in 39 other countries around the world.
Experian also offers consumer products to help people improve their financial well-being. Once you sign up to become an Experian member, you can access perks such as credit monitoring, dark web surveillance reports, and a privacy scan. And if you don’t have much of a credit footprint, the Experian Boost program allows you to increase your credit score and thicken your credit file. This credit-building tool takes into account your positive payment history for your utility, phone, and streaming bills — which credit bureaus don’t traditionally consider.
Equifax
Founded in 1899 as a grocery store that extended credit to the community, Equifax has grown to become one of the three largest credit bureaus in operation. Beyond aggregating and assessing consumer credit information, Equifax also offers various services to help consumers manage their credit. For example, the myEquifax platform that the company launched in 2018 provides a convenient way for consumers to file disputes and place fraud alerts.
Though Equifax has provided immense value to consumers worldwide, a recent incident has caused some people to lose trust in its security measures. In 2017, Equifax experienced a data breach that compromised the personal data of around 147 million consumers. As a part of the settlement, Equifax now offers free credit score and identity monitoring to those who’ve been affected by the breach.
TransUnion
Like the other two credit bureaus, TransUnion has a significant global presence. As of today, the company operates in over 30 countries and maintains a credit database of over one billion consumers. Apart from traditional credit reporting, TransUnion also offers a variety of consumer credit tools and resources. For instance, the CreditCompass platform provides personalized recommendations to help you improve your credit score. And if you want complete control over who gets to access your data, you can use the Credit Freeze tool to prevent new credit accounts from being opened in your name.
How do you contact the big three credit bureaus?
Knowing how to get in touch with the credit bureaus can help protect your financial health and keep your credit file accurate and up-to-date. For example, if you spot negative information on your credit report, you should dispute it immediately as it could affect your credit score and borrowing power.
You’ll also want to contact the credit bureaus if you’ve been a victim of identity theft. This way, the credit bureaus can place a fraud alert on your file to notify creditors to verify your identity before extending credit in your name.
Finally, if you’re planning a major financial move like buying a home or taking out a loan, it’s a good idea to check your credit report information in advance, so there are no surprises down the road.
Here’s how to contact the three major credit bureaus for assistance:
| For a dispute | For a fraud alert | For a copy of your credit report | |
| Experian | Phone: 855-246-9409 Mail: Experian P.O. Box 4500 Allen, TX 75013 Online: file a dispute with Experian here |
Phone: 1-888-397-3742 |
Phone: 1-888-397-3742 Online: request a free copy from Experian here |
| Equifax | Phone: 1-866-349-5191 Mail: Equifax Information Services LLC P.O. Box 740256 Atlanta, GA 30374-0256 Online: file a dispute with Equifax here |
Phone: 1-888-836-6351 Mail: Equifax Information Services LLC P.O. Box 105069 Atlanta, GA 30348-5069 |
Phone: 1-866-349-5191 Mail: Equifax Information Services LLC P.O. Box 740241 Atlanta, GA 30374-0241 Online: request a free copy from Equifax here |
| TransUnion | Phone: 833-395-6941 Mail: TransUnion Consumer Solutions P.O. Box 2000 Chester, PA 19016-2000 Online: file a dispute with TransUnion here |
Phone: 1-800-680-7289 Mail: TransUnion Fraud Victim Assistance P.O. Box 2000 Chester, PA 19016 |
Online: AnnualCreditReport.com. |
Credit reporting agencies FAQ
How often do credit bureaus update their reports?
Who can see your credit report?
The Fair Credit Reporting Act (FCRA) limits who's allowed to see your credit report. If a third party wants to access your credit information, they must have a valid need – for example, to assess your ability to repay a loan.
According to the Consumer Financial Protection Bureau, here are some types of organizations that consumer reporting companies can provide your information to:
- •Lenders
- • Landlords or residential real estate management firms
- • Employers, volunteer organizations, or government agencies
- • Banks and credit unions
- • Debt collectors
- • Insurance companies
- • Utility companies (e.g., gas, electricity, water)
When do creditors and collection agencies report late payments to credit bureaus?
If you have a delinquent account, your creditor may report the late payments to the credit bureaus, leaving a stain on your credit report that could take years to disappear. If your account is sufficiently in arrears, your creditor may sell your debt to a collection agency. These agencies may then file their own notices of delinquent accounts with the credit bureaus, creating, in effect, a duplicate report that will now take additional effort to expunge. Generally, adverse information stays on credit reports for seven years — and bankruptcies remain on your record for up to 10 years.
Keep in mind that collection agencies may also attempt to collect the debt from you directly through email, text messages, and phone calls. So to avoid having your account sold to a collection agency and reported to credit bureaus, be sure to keep up with your payments and avoid falling behind.
How can I get my free annual credit report?
How to remove incorrect negative items from credit reports?
Negative items on your credit report can have a major impact on your ability to obtain new credit or secure favorable terms. If you're wondering how to remove items from credit report that are negative and incorrect, here are two ways to do it:
- •Dispute the negative items yourself: Though performing credit repair Tyourself requires a lot of time and energy, it can save you quite a bit of money compared to hiring professionals. Here's how to do it. Get a copy of your credit report from the major credit bureaus. Once you have your report, review it carefully to identify the inaccuracies. Then reach out to the credit bureau and provide documentation supporting your claim that its information is incorrect. Generally, the bureau will have 30 to 45 days to investigate and respond. If the negative item is erroneous, the credit bureau should make necessary corrections.
- •Seek help from a credit repair company: If you'd prefer to leave credit repair to the professionals, seeking help from a credit repair company may be a better choice — especially if you have a lot of negative items on your credit report that would take forever to dispute on your own. Just be sure to compare services and perks offered by different providers to find the best credit repair companies for your situation.
Credit reporting agencies: The bottom line
The major credit bureaus in the United States are Experian, Equifax, and TransUnion.
- Credit reporting agencies collect extensive information about consumers’ financial history. They use this information to generate a credit report and calculate a credit score, which lenders use to determine whether to extend credit.
- If you fall behind on your bills, your creditors may report your delinquent accounts to the credit bureaus. This will damage your creditworthiness, making it harder to get loans, credit cards, and other lines of credit in the future.
- By understanding how the credit scoring process works and keeping an eye on your credit report, you can take steps to improve your credit scores and get access to better borrowing terms.
