You’ve probably heard a lot about the three credit bureaus, but many Americans aren’t sure exactly what they are. That’s OK because Prosper’s got the lowdown on who they are, what they do, and how they affect your life!
Let’s look at the three major credit reporting bureaus and how you can find out what are your three credit scores!
In This Article
The three credit bureaus are companies that maintain a file on each American consumer (with a few exceptions, covered below) with information on their credit history and activity, known as a credit report. They analyze each credit report and produce a credit score, a three-digit number calculated to rate the individual’s creditworthiness or likelihood of paying back a loan.
There are three major credit bureaus:
- Experian: Experian is most dominant in the western US and has their corporate HQ in Dublin, Ireland, with employees in 37 countries.
- Equifax: Equifax is headquartered in Atlanta and most dominant in the south and midwest, as well as several foreign countries.
- TransUnion: TransUnion is based in Chicago and employs 8000 people with regional offices in Hong Kong, India, Canada, and several other countries.
Each credit bureau is an independent company, but all three are subject to strict regulation under federal and state law, such as the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, and the Fair Debt Collection Practices Act. These and other laws limit how they collect, use, and distribute information about consumers.
When the credit bureaus were established, they didn’t serve the entire nation. There were many credit bureaus in different areas. As time passed, mergers and acquisitions led to each bureau having a more regional presence, with Experian in the west, Trans Union in the east, and Equifax in the south.
In the modern era, the three major credit bureaus each serve the entire nation. They evolved as regional presences, and in some areas, one bureau may have a larger market share than others as a legacy from when they operated on a regional level.
Credit bureaus receive information from banks, financing companies, retailers, property management companies, the government, and many other organizations that consumers do business with. The credit bureaus make their money by selling information about each consumer to other companies that wish to do business with those consumers.
Lenders and creditors typically report some or all of the following information to each credit bureau:
- On-time payments
- Late payments
- Loan terms
- Credit limits
- Balances owed
- New accounts
- Account closures
In addition, credit bureaus usually track items such as:
- Tax liens
- Credit inquiries
However, each credit bureau is independent, and not all lenders and creditors report every item to every credit bureau. Therefore,your credit score may vary with each bureau,depending on what information has been reported to them.
Negative information, such as late payments, remains on an individual’s credit report for seven years, at which point it is removed.
Credit bureaus collect information from other sources, and that information isn’t always correct. Fortunately, the Fair and Accurate Credit Transactions Act gives Americans the right to request one free credit report every twelve months from each credit bureaus. So, it’s important to review your credit report regularly.
If you find inaccurate information on your credit report, you may dispute it to the credit bureau. The credit bureau then has 30 days to investigate the dispute, and if they can’t prove the item is legitimate, all three credit bureaus must remove the inaccurate information.
The credit bureaus can only go by the information they receive from other parties. As a result, the system depends on reports from financial institutions and other entities to report customer information. This causes an issue known as credit invisibility which affects up to 11% of the adult American population.
Young people and recent immigrants often have a limited credit history or no credit history at all. Without a credit report, it’s difficult to obtain credit, but this has other effects. For example, landlords, employers, and utilities often use credit reports as well, and without a credit report, these individuals must often pay higher deposits to obtain services, if they can obtain them at all. If this applies to you, check out our guide to establishing new credit!
Credit scores are a rating of each consumer’s creditworthiness or their likelihood of meeting their financial obligations. They range from 300–850.
Several different companies that provide credit scoring to the three credit bureaus, with the most common being the Fair Isaac Corporation, which provides the FICO® score. Other lenders have different criteria, but generally, scores are evaluated as follows:
- Below 600: Subprime or poor credit
- 600–650: Below average credit
- 650–700: Average credit
- 700–750: Good credit
- 750–800: Very good credit
- 800 and above: Excellent credit
The exact formula is a trade secret, but we do know that the following criteria apply, in order from most to least impact on your score:
- Payment history: Making your payments on time boosts your score. Late payments have a significant negative impact on your score.
- Credit utilization: For your revolving credit accounts such as credit cards or Home Equity Lines of Credit (HELOCs), using a high percentage of your available credit impacts your score negatively.
- Average age of accounts: Accounts that have been open longer demonstrate stability and thus positively impact your account.
- Credit types: A mix of credit types, such as credit cards, auto loans, mortgages, and home equity loans, boosts your credit.
- Recent credit applications: Lenders consider applying for multiple loans in a short timeframe to be a sign of financial distress. Numerous credit applications in rapid succession can lower your credit. This is why financial experts advise against applying for any new credit (other than a mortgage) when shopping for a house.
It’s important to note that the three credit bureaus are not required to provide your score with your free annual credit report. They usually charge to see your score, but there are ways to get your score for free. For example, Experian offers an app called Experian Boost, which allows you to get credit for bills you’re already paying and provides you with a free credit score check. As a Prosper Personal Loan Borrower, you can log into your account and opt-in to check your FICO® Score & your month-to-month progress, view key factors affecting your score, and access FAQs and other FICO® Score educational resources.
Since each bureau may have different information, your credit score may vary between them. There are paid apps that allow you to check your score with all three bureaus, or you can do it individually with each bureau. However, fees are often involved. Generally, if you’re checking your credit reports regularly and know that the bureaus have similar information about you, the score will most likely be similar for all three credit bureaus. If you know your credit is better with one bureau than others, it’s worth asking a lender to consider your credit report with that bureau.
Credit bureaus play a big role in many Americans’ lives. But not many people think about them often or even know what they do. We hope that with this post, you have a better understanding of the three credit bureaus, the role they play in the credit process, and how to work with them to ensure your credit report is accurate and as advantageous as possible!
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