Credit Bureaus — What They Are & the Top 3 Reporting Agencies
- Credit bureaus, also known as credit reporting agencies, collect and report on consumer credit and payment information.
- The three major credit bureaus are Equifax, Experian, and TransUnion.
- There are many other credit bureaus, some of which collect very specific data.
It’s March 9, 1922, and you need a loan. You head up to the bank and ask Mr. Payne to lend it to you. What happens next? Well, he doesn’t check your credit score because those don’t exist yet. And even if they did, there’s no such thing as credit cards either.
So instead, Mr. Payne starts calling people you’ve owed money to. Don’t worry. He doesn’t know about your poker debt to Sammy (probably?). But he will call Ms. Leight down at the grocery store to see if you pay your tab monthly. And Mr. Charles up at the hardware store. Then he’ll do a home visit. And after all that, he still may not lend money to you if he decides he doesn’t like you.
Thankfully, things don’t work that way anymore. You just need to worry about three little digits: your credit score. And those come from credit bureaus. Fortunately, those work a lot more predictably than Mr. Payne.
What Are Credit Bureaus?
Credit bureaus, also known as credit reporting agencies, collect and report on consumer credit and payment information. They obtain data about how individuals use loans and credit cards, then they sell that information to companies that use it to determine creditworthiness (aka, how likely you are to repay any money they lend you).
How Credit Bureaus Work
Credit bureaus don’t make lending decisions. They just compile data on individual consumers and share that information with potential lenders and creditors.
It’s those companies that use what they learn to make informed decisions without coming to your house or talking to your hairstylist. And let’s face it. The way we talk to hairstylists, they’re like priests who didn’t vow to keep anything secret.
The good news is credit bureaus collect that information without interviewing any service providers with whom you may have overshared.
Where Credit Bureaus Get Information
Credit bureaus are probably one of the few businesses that don’t pay a dime for the product they sell. Not that they don’t have overhead. They do. They need employees, a place for them to work, and equipment for them to work on just like any major corporation that doesn’t understand the virtues of remote work.
But in terms of the product they sell — the data — that’s all voluntary.
Various companies to whom you owe money, called “furnishers” in the biz, freely furnish the data credit bureaus sell. In fact, it costs the furnishers money in the form of the employee time and equipment necessary to do it.
Furnishers do it because the threat of any misstep ending up on your credit report keeps a lot of people in line. Plus, it benefits the industry. If everyone reports, everyone knows who they should and shouldn’t lend money to.
This is sounding more and more like organized crime the longer I write. Is a furnisher anything like a mechanic, and how many years will you spend in the clink? But I swear all of this is legal, and they won’t send anyone to break your legs.
That said, furnishers don’t have unlimited resources. They may only report to one or two credit bureaus, which is why you should always check all three reports and why many lenders do too.
Types of Data Credit Bureaus Collect
Bureaus don’t collect and sell just any kind of information. They’re interested only in data that shows how likely you are to pay back money someone lends you. Personal data like your race or ethnicity and political beliefs don’t make the cut.
What Happens to Your Information
Credit bureaus use the information they collect to compile your credit history and formulate a credit score. Companies pay credit bureaus to access those histories and scores. But who accesses your data and what they do with it varies.
- Lenders and Creditors. The most common reason to get a credit report is to determine whether someone’s creditworthy. Lenders access this information plus your credit score, then use that information as part of a separate formula to determine if they should lend you money and how much they should charge you in interest.
- Employers. Companies that hire you may check your credit history to see if you’re in financial distress, check your employment history, and confirm your identity. That’s especially likely if you have access to money (the company’s or their customers’).
- Utility Companies. People you owe monthly amounts to may check your credit score to gauge how responsible you are. It may not determine whether you can have service, but they may require you to pay a deposit.
- Insurance Companies. Where legal, insurance companies may use your credit report information as part of their own formula for determining how likely you are to make a claim.
- Rental Property Owners. People who plan to rent property to you need to know how risky it is to do so. They may reject your application or ask for a bigger deposit if they don’t like what they see.
- Collection Agencies. It may sound counterintuitive for a collection agency to check your credit, but they may do it just to find out where you are since it contains info like your current address and phone number. It’s one of the few instances in which a company doesn’t need your direct permission or a court order to see your data.
- Government Agencies. Government agencies can use your credit history info to determine your eligibility for benefits or how much you can afford to pay in child support. It can also use it to look for your contact information or determine whether you have unclaimed assets. However, unless they have your permission, they must have a legally legitimate reason to access it.
- Anyone With a Court Order. Unless someone has your direct permission or what the law directly names as a legitimate reason to view your credit history (such as a collection agency that needs your contact information), a person or entity must have a court order to view it. But they’re tough to get, and rest assured that anyone who wants it has to provide a compelling reason they need it.
The 3 Major Credit Bureaus
The three major credit bureaus are Equifax, Experian, and TransUnion. That’s what people usually mean when they talk about credit bureaus. They provide your credit history with regard to credit and loan accounts.
In general, they don’t provide information about your monthly bills unless a utility or service reports a delinquent balance. That means you don’t get credit for all the bills you pay on time, but they can come back to haunt you if you don’t pay.
The exception is Experian. Its regular credit reporting service works just like the other two. However, you can sign up for a service called Experian Boost, which gives you credit for paying your bills on time, increasing your Experian credit score.
Other Credit Bureaus
You wouldn’t be alone if you thought the Big Three were the only credit bureaus. But you would be wrong. The Consumer Financial Protection Bureau maintains a list of consumer reporting agencies serving various markets. That list includes national bureaus like the ones you’ve heard of plus some oddly specific ones. Examples include:
- NCC (National Cred-A-Check Inc.): Provides credit information to help casinos manage risk. It helps them identify players who may engage in illegal activities like money laundering or be at risk for financial issues.
- National Consumer Telecom & Utilities Exchange: Collects information valuable to utility and telecom companies, such as connection requests and payment history.
- ChexSystems: Verifies checks and gathers info on checking and savings accounts.
- LexisNexis C.L.U.E. If you’re a reporter or legal professional, you may think of LexisNexis as the research company. And it is. It lets insurance companies research your policy and claims data so they know what to do when setting rates.
- Innovis: It’s like the Big Three but less well known. That doesn’t mean you shouldn’t freeze your credit report with it if your information is compromised.
Credit Bureaus & Your Rights
Credit bureaus (all of them — not just the major ones) have to follow all the regular laws of the United States and any applicable state laws. International ones may even have to follow laws in magical faraway places like Canada.
But the big one, at least in the U.S., is the Fair Credit Reporting Act, though states may have their own. It spells out a consumer’s rights with respect to credit reporting.
The FCRA is around 100 pages, depending on how you print it out. So it’s impossible to cover all its provisions. The bullet points with regard to your rights are:
- You have the right to one free credit report from every bureau (including and beyond the Big Three) every 12 months, plus in a handful of other circumstances, such as when you’re the victim of identity theft.
- You have the right to buy your credit score and know how the bureau calculated it.
- You have the right to know if anyone uses any information on your credit report against you. It’s called an adverse action notice.
- Negative information can only remain on your credit report for seven years (or 10 years for certain types of bankruptcies).
- You have the right to dispute inaccurate information, and credit bureaus must investigate. If it turns out you’re right, they must remove or correct it.
- A company must have a “permissible purpose” (or a court order) for obtaining a credit report on you. In many cases, that means they need your direct permission. But they may not require it if they have another permissible reason, such as making a lending decision after you apply for a loan.
- You have the right to opt out of prescreened offers.
- You have the right to put a security freeze on your report to prevent unauthorized access (primarily identity theft).
- You can sue credit bureaus (and sometimes others) who violate your rights under the FCRA.
Credit Bureaus & Information Security
By now, you have to be wondering if all that really important, personally identifying data is safe. The answer is yes and no.
Credit bureaus are required to protect your information under the law. That means your data is roughly as safe there as it is at the average bank, which is pretty secure as cliche security metaphors go. I mean, bank-level is one step below Department of Defense-level if ads and procedural dramas are to be believed.
And that’s generally pretty secure in terms of keeping it out of just anyone’s hands. But metaphors don’t make your information truly safe. Calling something bank-level or DOD-level doesn’t make it criminal-proof.
Our laws are woefully inadequate (and inadequately enforced) for the modern era. And if following the law is the bare minimum a company does (which is enough to call it bank-level security, by the way), then you can’t assume it’s safe. Every major bureau has had a data breach of some kind. So have a lot of banks.
I’m not saying they’re evil corporations just because they’ve had breaches. (Though charging people for identity theft prevention services may be a bridge too far. Not gonna lie — that does kind of sound like a mafia-esque protection racket.)
My point is that you should assume your information is unsafe and act accordingly. But I tend to think you should always act that way.
Credit Bureaus FAQs
There’s a lot more to know about credit bureaus than can fit in a single article. These are the answers to the most common questions, but hit us up on social media if you have any we didn’t answer.
Which Credit Bureau Is the Best?
One isn’t necessarily better than the others. The three major credit bureaus are just the most commonly used. They’re generalists that collect a range of information about your overall credit health. But they’re not the only ones.
Some bureaus even focus on a particular type of data, such as utilities. The companies that check those may not care if you always pay your credit card on time. They’re mainly interested in how you do paying monthly bills.
But even among the big three, there’s not a best. They just may have different information. That said, the most important bureau is the one that matters now. For example, if you’re buying a car, and the dealership you choose only uses Experian, that’s the most important one now.
But in general, you should focus on ensuring all three major bureaus have accurate information and the highest score you can get. Everything else should fall in line naturally.
Why Do I Have Different Credit Reports & Scores for Each Bureau?
Reporting is voluntary. That means a company you owe money to may only report to one or two of them, and anyone they don’t report to has incomplete information. That can factor into why your score can be different too. But there’s also another reason.
There are different versions of the formula used to calculate your score. The two major companies are FICO and VantageScore, plus a bureau could have their own proprietary score. On top of that, the formulas are subject to tweaking, meaning there are many different versions of each individual scoring model a bureau could be using.
How Do I Contact Credit Bureaus?
If you’re looking for a minor agency, the Consumer Financial Protection Bureau maintains a list.
You can contact the big three by mail, phone, or online by going to their website’s contact page:
Credit bureaus sound scary at first. They’re like Big Brother’s slightly better-looking and much less annoying cousin who nonetheless likely doesn’t have your best interests at heart.
That said, lenders are going to find a way to protect their assets by measuring their risks. Back in the day, that involved dressing up, making sure your home was spotless, and hoping you could make the best coffee and cakes the banker had ever tasted. (And hoping no one he interviewed spilled the beans about your gambling debt.)
Credit bureaus aren’t perfect, but they make those decisions much less arbitrary (and pastry-dependent).