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The three major credit-reporting agencies and their differences

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Your credit score is one of the most important numbers in your financial life. When you apply for a loan of any kind — from a new credit card to a mortgage — lenders will reference your credit score to get a feel for how big a risk you would be, and a higher score can get you more favorable interest rates.

Most people know what a credit score is, but many don’t fully understand where they come from. Behind the scenes, credit scores and the credit reports they rely on are tracked and managed by three major credit-reporting agencies: Experian, TransUnion, and Equifax.

These three major credit reporting bureaus play a powerful role in your finances. Here’s what you need to know about Equifax, Experian, and TransUnion and what makes each of them unique.

What are the three major credit bureaus?

The three major credit bureaus are companies that track your activity related to debt, borrowing, and a few other limited activities with a goal of giving lenders a clear view of your credit risk.

Equifax, Experian, and TransUnion track everyone’s data — whether they like it or not, in most cases. Even if you had no idea they existed, odds are these companies have records on you if you’ve ever had any credit card, auto loan, mortgage loan, or other loan accounts in the US, particularly in the last 10 years. Banks, credit card companies, and others pay for access to your credit report or credit score for permitted uses.

While these three are the biggest, other credit bureaus are out there as well. Another important consumer credit agency is Chex Systems, a company that tracks negative histories with bank accounts. Dun & Bradstreet is a major credit agency that tracks information about businesses of all sizes.

Experian

Experian is a global credit-reporting agency with details on about 220 million individuals and 40 million businesses in the United States. In addition to credit scoring information, it tracks household demographics, vehicle records, and other large data sets.

Experian offers free access to credit reports and credit scores through the Experian website or app. It offers extensive credit education resources to help consumers improve their credit.

One unique feature at Experian is Experian Boost, a product that allows you to add information from utility or phone bills as part of your positive credit history, which can instantly improve your FICO credit score.

While Experian has a generally positive reputation, it earned negative press in 2015 for its role in a data breach where the information of 15 million consumers was potentially exposed. It was also fined by the Consumer Financial Protection Bureau in 2017 for providing misleading credit score information to consumers.

Experian traces its roots to 1968 and was established in its current form in 1996. It’s legally headquartered in Ireland and its stock is listed on the London Stock Exchange. It is a component of the FTSE 100 index, a major index for UK stocks similar to the Dow Jones Industrial Average or S&P 500 in the United States. The operational headquarters for the company is located in Nottingham, UK, and Experian has a major US office in Costa Mesa, CA.

TransUnion

TransUnion is an international credit- and data-reporting company with information on one billion consumers in over 30 countries. TransUnion data covers over 200 million consumers in the United States, and offers credit improvement resources to help you improve your credit history and score.

TransUnion is a data source for several popular credit-scoring apps, including Credit Karma and the credit score section of the budgeting app Mint. Like its top two competitors, TransUnion offers credit reports and/or scores to customers in the financial sector, employers, landlords, and others who need access to credit details.

You can freeze and unfreeze your credit with TransUnion for free. You can subscribe to paid services that give you more features and options to lock and manage your credit information. TransUnion has a generally positive reputation, though it has run into challenges, particularly around transparency for how it charges for TransUnion consumer products.

TransUnion is based in Chicago and was founded in 1968. It’s publicly listed on the New York Stock Exchange and a component of the Russell 1000 index.

Equifax

Equifax is a multinational credit-reporting agency that operates in 11 countries. It tracks consumer data on more than 222 million US consumers. Equifax offers a range of business and consumer credit products. Major consumer products include a credit lock product and comprehensive credit-monitoring solution.

This credit bureau is perhaps best known for the data breach in 2017 that affected 147 million consumers in all 50 states. This led to a settlement worth more than $575 million and included both civil penalties and an offer of free credit monitoring and identity theft protection to affected individuals.

Major industries supported by Equifax credit reports include financial firms, insurance companies, retailers, healthcare providers, utilities, government agencies, and other businesses.

Equifax, founded in 1899, is headquartered in Atlanta and its stock is listed on the New York Stock Exchange. Equifax is a member of the S&P 500.

Why do my credit reports and credit scores not match?

The major credit bureaus are required by law to give you free access to your credit report at least once per year, which you can access at AnnualCreditReport.com. Due to the COVID-19 crisis, all three bureaus are offering weekly reports for free through at least April 2021.

If you were to pull all three credit reports at once, you would likely find that they don’t exactly match. If you get your credit score from the three credit-reporting bureaus, they would probably be roughly similar but, again, not exactly the same.

The differences could be caused by timing differences between updates of your credit report. They could be caused by credit account which are reported to one credit bureau and not the others. Or it could be that they are using different models, like different versions of FICO or VantageScore.

Experian, TransUnion, and Equifax get data from banks and other companies through big data files from banks, credit unions, credit card companies, and other sources. This information is cobbled together to form your credit report. According to a study by the Federal Trade Commission, about one in five consumers have errors on their credit reports.

The credit bureaus use different data sources and use different models, which can account for some differences. However, it’s important to review your credit report periodically to hunt down incorrect negative information.

How to correct credit report errors

For the roughly 20 percent of Americans with an error on their credit report, it’s a good idea to find and remove that incorrect information. Doing so could increase your credit score and improve your approval odds or interest rates for future loans.

When you find an error on your credit report, you can work with the credit bureau and company that supplied the information to get it corrected. This is accomplished through a process called a dispute.

Entering a dispute for your credit report with any of the three credit-reporting agencies is easiest for most people to do online. If you’re not comfortable managing this process on the web, you can generally also handle it by mail.

Here are links to start a dispute at Experian, TransUnion, and Equifax.

Locking your credit reports to avoid fraud

One benefit of the Equifax debacle is that it led to the ability to freeze and unfreeze your credit report for free. This benefit went live in September 2018 and makes free a service that used to cost about $10 every time you used it.

When you freeze your credit, identity thieves are generally unable to open new accounts in your name. If you want to open a new credit account, you’ll need to temporarily unfreeze your credit while you apply.

Head to the credit bureau websites or download their mobile apps to set up your account and handle locking and unlocking your credit.

Monitor your credit regularly to build an excellent credit score

A good credit score could be the difference in your ability to buy a car or home in the future. If you’re approved, good credit could save you tens of thousands of dollars over time on high-value loans like a mortgage. Because your credit score is so important for your finances, you should never lose track of your credit.

With an active focus on your credit report and credit scores from the three credit reporting bureaus, you can build an excellent credit score that gets you access to the best borrowing products, including the best rewards credit cards and interest rates available. It may not happen overnight, but it’s definitely worth the time and effort to improve your credit.

Source: on 2020-07-01 12:18:45

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