An Overview of the Three Main Credit Bureaus and What Distinguishes Them
What is a credit bureau? What are the three credit bureaus? What are the differences between the main credit reporting agencies?
September 3, 2021
In the United States, our credit ratings have a huge impact on nearly every aspect of our financial lives. They affect how much credit lenders will issue us, how much interest we will pay on that credit and even our ability to get a job or lease an apartment.
The three credit bureaus are the gatekeepers of our credit information; they are Experian, TransUnion and Equifax.
What do these companies do? What makes them different from one another — and what does this mean for you?
What is a credit bureau?
A credit bureau is a company that specializes in compiling credit reports and credit information relating to individual borrowers. These are private companies, but they are highly regulated under the rules of the Fair Credit Reporting Act (FCRA).
Essentially, these companies gather information — payment history, debt balances, delinquencies, bankruptcies, etc. — on each American that has a credit history.
They then use this information to issue credit reports, which are used to derive credit scores.
A credit score is a numerical rating of an individual’s creditworthiness — essentially, a measure of how likely they are to repay debts. Credit scores range from 300 to 850, and are extremely important for anything related to our financial lives.
If you’ve ever taken out any sort of loan or used a credit card, then you have a credit history with one of these bureaus ... or, most likely, all three!
When you do anything that requires pulling your credit report, one of the credit bureaus will be involved. They sell these credit reports to lenders (as well as landlords and employers, in some cases), who purchase the reports in order to learn more about the individual to whom they are lending money.
As individuals, most of us don’t really interact with these credit bureaus. The only situation where you might need to contact a bureau is if there is a mistake on your credit report, which is rare. You may also interact with a bureau if you decide to freeze your credit.
You can request a full credit report on yourself, which is free once every 12 months. However, you will do this through AnnualCreditReport.com rather than directly with the credit bureaus.
The 3 credit bureaus
There are actually many different credit bureaus, but the most relevant ones are Experian, TransUnion and Equifax. Here are some common questions you might have about the bureaus.
What’s the difference between these three credit reporting agencies?
The short answer: not a whole lot. Each agency aims to collect the same information on individuals. They each have slightly different methods and lenders may not report all credit information to all the bureaus, which means that your credit score with Equifax might be slightly different from your score with TransUnion.
Experian is the largest of the three bureaus. In the United States, Experian first served only the western states, but it has since expanded nationwide. Because of its history, Experian remains more popular with lenders in the West than with the rest of the country.
Equifax, on the other hand, is most commonly used in the South and the Midwest, although many lenders use it nationwide. The company’s image was substantially tarnished in 2017 when it announced a massive data breach, affecting the private information of 147 million people.
TransUnion is headquartered in Chicago but its services are used across the nation.
Which credit bureau is best?
That depends on whom you ask. Ultimately, as individuals, we can’t choose which bureau a lender or landlord will use. Banks will generally have their preferred bureau, or may even pull reports from all three.
Why do credit bureaus matter?
Credit bureaus are the gateway through which lenders and landlords access your credit information. The results of the reports that these companies compile can affect your ability to get a credit card, apply for a mortgage, refinance debt and possibly even rent an apartment or get a job.
Why are my scores different at different bureaus?
You may find that your credit score is different at each bureau. This is mostly a result of incomplete data. Not every lender reports to all three credit bureaus, so it’s possible that one bureau will have a more complete picture of your credit history than another.
What is a FICO Score?
FICO is the company that created and calculates the FICO Score, which is the numerical credit score that many lenders use to evaluate creditworthiness. FICO calculates this score based on information from the three credit bureaus, but the company is not considered a credit reporting agency or bureau.
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