Credit bureaus are private companies that record your credit history. They receive information about your payment habits from people who loan you money. That information gets compiled into the database of each credit bureau and becomes part of your credit profile. This guide can help you understand what credit bureaus do and how they can impact your credit and your financial life.
Table of Contents:
What is a credit bureau, and what do they do?
Credit bureaus track and report on the history of your credit usage, behavior, and patterns. They are also referred to as credit reporting agencies or CRAs. In this article, we use all three terms.
Credit bureaus are the agencies that create and maintain consumer credit reports. They also distribute your reports to outside parties when legally permissible, and typically only with your direct permission. But they can sell some information without your consent.
Most people are familiar with the big three credit bureaus in the U.S. – Experian, Equifax, and TransUnion. But you may be surprised to learn that those are not the only national credit bureaus. There are a slew of other smaller agencies that can affect your financial life.
The good news is that credit reporting agencies are highly regulated by a consumer protection law called the Fair Credit Reporting Act (FCRA). Two government agencies manage the regulations included in FCRA—the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).
What are credit bureaus allowed to do?
Credit reporting agencies are privately-owned companies that are allowed to sell credit data about consumers. They make money by providing services, including:
Using your data to create credit reports
The credit bureaus have large amounts of data about consumer behaviors that they use to create their own customized version of consumer credit reports. Companies use credit reports to find new clients, cross-sell new goods and services to existing clients, manage accounts, offer new services, and cut down on delinquent accounts and fraud.
Selling data to companies
Credit bureaus can sell data to companies who want to do business with you. While companies do need a “permissible purpose” to access your credit report, you give them permission when you apply for new credit. You can also permit background checks involving your credit history. Then companies can decide if you are the type of client they want to do business with.
Despite the protections offered by the FCRA, credit bureaus can still sell some of your credit information without your permission. Credit data can be used for non-lending decisions, such as extending pre-approved credit card offers. The good news is that you can opt out of receiving these offers if you wish.
Selling data directly to consumers and businesses
Credit bureaus also make money by selling credit reports to consumers and subscription services to monitor credit changes. Although the FCRA allows you to get one credit report for free from each credit bureau every twelve months, you typically must pay if you want to check your reports more often.
Additionally, CRAs can sell businesses your credit reports. This is what happens when you use something like a third-party credit monitoring tool. The business pays to access your credit report, and then you pay the company to help you monitor your credit.
How credit bureaus collect information
The goal of credit bureaus is to track as much information as they can about consumers within the scope of the law. They do this so that they have the most complete credit data possible on each consumer.
Credit bureaus get information from companies that do business with you, including credit card issuers, landlords, banks, credit unions, loan companies, collection agencies, and others. They track and record any financial history which involves credit that has been reported about you to them. Companies are not required to report your information to every credit bureau. This means that if you have a loan with a smaller bank or credit union, that account may not appear on all of your credit reports. This can lead to differences in your credit score. Your score may be different, depending on which credit bureau’s information was used to calculate it.
Credit bureaus also have access to public records. This allows them to track relevant public credit data about you, such as bankruptcies and foreclosures.
What are the three credit bureaus?
This question is a bit misleading because there are actually many more credit bureaus in the U.S. than just the three that people typically know about. The three major credit bureaus in the U.S. are Experian, Equifax, and TransUnion. However, there are other national credit reporting agencies that you also need to know about.
Equifax
The company was formed in 1899 with its primary focus on insurance companies. Currently, Equifax analyzes credit risk for businesses. Additionally, the company provides verification, identity, and fraud services. The company also offers workforce management services.
Equifax collects and reports on consumer behavior for over 800 million consumers. Equifax likely has information about you and keeps much of your consumer history in its files. When you choose to do business with a company, including insurance products, utilities, or any loan-related company, they will likely ask Equifax (or TransUnion or Experian) for your history.
The company has suffered many security failings and has received 57,000 complaints from consumers. The company has also received fines from the FTC.
Experian
Experian offers customer insight and credit risk as its primary services. Additional services include fraud detection, debt management, and vehicle identification. The company is one of the oldest credit reporting agencies and can trace its roots to 1826.
Experian has data on close to one billion consumers worldwide, including about 235 million U.S. consumers. So, as with the other two major credit reporting agencies, Experian likely has data on you that is given to companies with who you wish to do business.
Experian has a unique service called “Experian Boost”, which allows consumers to use positive information about their utility and rent payments to increase their creditworthiness.
The company has had numerous data breaches, with the latest one in 2021, which exposed names and social security numbers for consumers in Brazil. An earlier data breach in 2015 revealed the data of 15 million T-Mobile customers in the U.S.
TransUnion
Founded in 1968, TransUnion is the most recent of the top three major credit bureaus. Transunion offers risk management and authentication solutions, healthcare and property administration, and identity and fraud services.
TransUnion has data on over 200 million consumers in the U.S. This means that most consumers in the United States have a file with TransUnion. As with the other two agencies, TransUnion provides credit reports to companies you wish to do business with.
TransUnion has a service called “ResidentCredit” that helps landlords report tenants who pay their rent on time. ResidentCredit helps to increase credit scores for renters.
While there are some consumer complaints about TransUnion, there are no significant data breaches or security failures.
The other credit bureau: Innovis
While most people are familiar with the big three credit bureaus, those are actually not the only bureaus that exist. In fact, there is another national credit reporting agency named Innovis. According to the Consumer Financial Protection Bureau, Innovis is a “supplemental credit bureau.”
Innovis does most of the things that the big three credit bureaus do but on a smaller scale. They also work with a limited number of clients, including GMAC Mortgage and Trade Capital Company. So, for most loan and credit applications, you won’t need to worry about what your Innovis credit report says.
Innovis often “cleans” pre-screened credit offers to ensure applicants do not have a bad credit history. You can “opt-out” and get removed from mailing lists. Currently, there is no score associated with Innovis data. FICO scores do not reflect Innovis’s data in consumer report files.
How to contact credit bureaus
Contact Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 378 4329
www.equifax.com
Get a free credit report or dispute information.
*You can also get your free credit report from annualcreditreport.com.
Contact Experian
P.O. Box 4500
Allen, TX 75013
888-397-3742
www.experian.com
Get a free credit report or dispute information.
*You can also get your free credit report from annualcreditreport.com.
Contact TransUnion
4530 Conference Way S
Boca Raton, FL 33431
(800) 916-8800
www.transunion.com
Get a free credit report or dispute information.
*You can also get your free credit report from annualcreditreport.com.
Contact Innovis
P.O. Box 1358
Columbus, Ohio 43216-1358
1-800-540-2505
www.innovis.com
Get a free credit report or dispute information.
*A free credit report is not available through annualcreditreport.com. You must contact the company directly.
Reasons to contact a credit bureau
If there are errors on your credit report, you have the right to contact the agencies and correct them. You can contact each credit bureau directly to dispute information that you believe is inaccurate. These must be valid errors, and there is a process that you must follow. However, it is your right to have a correct credit file.
You can also contact a credit bureau if you want to place a fraud alert on your credit report or freeze your credit report.
It’s important to note that the credit bureaus are not legally required to share most information with each other. This means that you usually must contact each bureau individually. This is true for credit disputes and credit freezes. Fraud alerts are the exception. If you place a fraud alert with one credit bureau, they will pass that information along to the other bureaus.
What information do credit reporting agencies have?
The credit reporting agencies maintain personal credit information about you. Credit bureaus can report both positive and negative information. You have a right to know about that data and change what is in error. You also have a right to privacy to the fullest extent of consumer protection laws.
Personal information that CRAs can report
- Personal identifying information such as your address, date of birth, Social Security number, previous addresses, phone numbers, aliases (variations of your name), and employers
- Account information for any type of credit or loan account, not including account numbers
- Public records, such as bankruptcies and foreclosures
- Credit inquiries
Account information that is negative can, by law, only be reported for a set time.
Personal information that CRAs don’t report
- Bank account information
- Income
- Medical records
- Tax liens
- Criminal and civil court judgments, besides bankruptcy and foreclosure
- Religion, political affiliation, race, disabilities, marital status
Are credit bureaus necessary?
When lenders and creditors decide whether or not they want to extend credit to a consumer, that consumer’s credit history plays a key role. Knowing a person’s history means the lending institution can understand its risk to approve or deny the loan. They can also adjust interest rates and fees based on that risk.
In the past, loans were often given by people who knew one another or could have members of the community vouch for them. That system was not always fair. National credit reporting agencies and uniform credit reporting rules made the process more equal for everyone.
With the information in a credit report, lenders can make unbiased decisions on who should get a loan and what interest rate is reasonable given the borrower’s risk. Without credit reporting agencies, getting a loan would likely be a much more complicated and exclusive process as it was in the past.
That being said, President Biden has recently proposed that the federal government would create a national database of credit information. A public credit reporting agency would eliminate the role of private credit bureaus.
FAQ
Q:How many credit bureaus are there?
Q:When do credit bureaus update?
Q:Who reports bankruptcy to the credit bureaus?
Q:Can I self-report to the credit bureaus?
Q:When do collection agencies report to the credit bureaus?
Q:When do credit card companies report late payments to credit bureaus?
Q:What role do the three credit bureaus play in your credit score?
Q:Do all credit bureaus work the same way?
Q:Do credit bureaus make errors?
Q:How often are the big three credit bureaus required to give you a free credit report?
Q:Do you have to dispute with all three credit bureaus?
Q:How do credit bureaus investigate a dispute?
Q:Can I sue a credit bureau?
Q:Can I prevent a credit bureau from selling my information?
Q:What laws govern and regulate credit bureaus?
Q:Do credit bureaus share information?
Get professional help to clean up errors in your credit report.
Article last modified on May 1, 2023. Published by Debt.com, LLC
