Credit scores are complicated, and most people don’t even realize that they have more than one. Not only are there different types of scores (FICO, VantageScore, etc.) that can apply to the same person, but each of the credit bureaus can also assign you a different score based on the way they compile your information and the factors they consider.
You may be wondering what the credit bureaus are and why they are given the power to decide something as important as your credit score. This comprehensive guide goes over the three main credit bureaus, how they work and the main details you need to know.
What are the main credit bureaus?
There are three main credit bureaus that handle the details that make up your credit scores: Equifax, Experian and TransUnion.
Equifax was founded in 1899, and has since grown to be one of the three main credit bureaus in operation. In addition to compiling and assessing consumer credit information, this company also offers credit and identity monitoring services and resources for consumers who want to improve or build credit or put a credit freeze in place.
As one of the biggest credit bureaus operating around the world, Experian supports clients in 80 different countries. The company actively maintains credit information on approximately 220+ million U.S. consumers as well as 40 million U.S. businesses, and they offer credit monitoring, free credit scores and additional tools for consumers.
The three major credit bureaus are the ones you are most likely to deal with, but there are some other, smaller credit bureaus that may track consumer and business credit information. These include companies like ChexSystems, Certegy Check Services, CoreLogic Teletrack, Innovis and others.
What do the credit bureaus do?
While each of the credit bureaus offers an array of products and services, they perform the same set of tasks when it comes to monitoring consumer credit information. Specifically, they each manage their own records that include information on accounts you have, balances you owe and payments you make. Because each credit bureau operates independently, they don’t always have the exact same information for each individual.
Credit bureaus also assign you a credit score (or more than one credit score), most likely the FICO score or the VantageScore. The FICO score is particularly important and useful since 90 percent of top U.S. lenders use it.
The difference between credit bureaus and credit reporting agencies
Note that you may find Experian, Equifax and TransUnion referred to as credit bureaus or as credit reporting agencies. That’s because these terms are interchangeable and mean the same thing.
With that being said, you should know that credit rating agencies are altogether different. A credit-rating agency is an institution that assesses the financial strength of government entities and companies. Examples of a credit-rating agency include A.M. Best and Standard & Poor’s.
Why are credit scores different?
Credit scores from each of the credit bureaus can be different for different reasons. For starters, each credit bureau may maintain different information on each consumer, and they might also give more weight to specific factors when coming up with a credit score.
Also note that the type of credit score a credit bureau assigns may be different and that you may get a FICO score from one and a VantageScore from another, for example. If you have your credit scores pulled at different times, you may also see varying scores due to the passage of time and more information being added to your credit reports.
Do you need all three credit scores?
According to Experian, it’s possible to only have a credit score with one or two of the credit bureaus but not all three. This is usually due to the fact that you have not met the minimum credit scoring criteria with each of the bureaus.
To have a FICO score with a credit bureau, for example, your credit report must have at least one undisputed account that is six months or older and at least one “undisputed account that has been updated in the past six months.” Further, your credit report cannot have a notation that you’re deceased.
To summarize, you are less likely to have a credit score with all three bureaus if you’re just starting to build credit from scratch. Since not having a credit score with each of the credit bureaus makes it less likely you’ll be approved for credit cards and loans, working on building your credit and improving your credit score with all three bureaus always makes sense.
What information do the credit bureaus collect?
The credit bureaus include an array of information that helps them determine your creditworthiness and assign you a credit score. Information they compile typically includes identifying information, like your name, address, Social Security number and date of birth, as well as information on the accounts you have had, balances you owe and payments you have made.
Information on hard inquiries is also included in your credit report, meaning there will be a notation for each time you applied for new credit within the last two years. Negative information and public records such as bankruptcies and accounts in collection are also included in your credit reports.
Disputing incorrect information
It’s a good idea to regularly review your credit reports. You can get a free copy once a year from each of the credit bureaus-Equifax, Experian and TransUnion. Fortunately, you can do this online and for free using the website AnnualCreditReport.com.
Fortunately, there is a formal process you can use to dispute incorrect information on your credit reports. Specifically, you will need to mail a letter to each of the credit bureaus with the incorrect information, as well as the company that provided the incorrect information. In your letter, you’ll need to include the following information:
Your name and contact information
An explanation of mistakes on your credit report
A copy of your credit report with the mistakes highlighted or circled
Supporting information that shows why the information is wrong
A request for the information to be updated or removed
You can dispute incorrect information on your credit reports with each of the credit bureaus using the contact information below: