Understanding why every individual has three credit files.
You’re one person, so why the heck do you need three different credit reports? Wouldn’t just one report be enough for creditors to assess your risk as a borrower?
Maybe, but our entire credit industry is based on a three report system. That means three reports, three copies of your history, and three different credit scores. Here’s why…
Three agencies means three reports
There are three credit bureaus that are recognized by creditors and lenders in the U.S. – that’s Experian, Equifax, and TransUnion. Each bureau is a separate corporate entity. They’re not government agencies, even though their records on you are pretty much accepted as law when it comes to lending.
As a result each bureau has its own proprietary way of presenting the information in your credit file as a credit report. Your credit file is all of the financial information that’s related to your history as a credit user.
A credit report is the public disclosure of any information the bureau is permitted to publish. That includes any positive or neutral information about your credit history, plus any negative information as long as you’re within the accepted penalty period. Most negative information only gets reported for seven years before it has to be removed.
Fact: The Fair Credit Reporting Act (FCRA) sets what can be reported and when information must be removed.
Since each agency has its own way of presenting the information, this means you have three reports. When creditors and lenders run a credit check, they pull all three reports and review them all to make a determination.
Is the information different or is it just formatting?
You might think it’s just how they present the information that would be different – and in many cases, that is the only difference. Unfortunately, that’s not always the case. Your three reports can have different information, too.
Mistakes. If one bureau reports something incorrectly, then their information might be different. This happens when the bureau makes a mistake. Of course, if a creditor makes a mistake in their reporting to the three agencies, then a piece of incorrect information can actually make it into all three reports.
This is why you have to be careful during the credit repair process. You have to look for mistakes that might only appear in one report, AS WELL AS mistakes that might appear in all three.