What Do Credit Bureaus Do?
- Credit bureaus collect and organize information about how you manage your financial obligations, then use it to create your credit reports.
- The three main credit bureaus (Equifax, Experian and TransUnion) maintain separate credit files that lenders and creditors use to help evaluate your creditworthiness.
- Credit scoring models also use information that credit bureaus maintain to calculate your credit scores.
- Regularly checking your credit reports from all three credit bureaus can help you spot errors, track progress and protect yourself from identity theft.
Credit bureaus collect financial information about how you use credit and repay debt. Lenders, creditors and credit card issuers share your account details — like payment history, balances and credit limits — with credit reporting agencies like Equifax, Experian and TransUnion.
Although credit bureaus play an important role in your financial life, they don’t ultimately decide if you qualify for financial products. Instead, they organize your data and sell it to lenders that have a permissible purpose to access your information and use your credit details to assess your risk as a borrower. Your credit reports, along with credit scoring models like FICO or VantageScore, can help lenders predict how likely you are to repay the money you borrow.
Understanding what credit bureaus do matters: It can help you make sense of how credit decisions happen, and provide guidance on how to put yourself in a better position before future credit applications.
How credit bureaus gather and use your information
Credit bureaus collect your financial information from companies that lend you money or extend you credit. Below is an overview of what that process usually looks like from start to finish.
- Lenders and creditors share your account data. Credit reporting is voluntary, but many creditors choose to share consumer account details with credit bureaus to encourage timely payments from borrowers. Monthly account updates often include balances, payment history, credit limits and current status (e.g., open, closed or past due).
- Credit bureaus compile data into credit reports. If you have established accounts with creditors that report to the major credit bureaus, your credit reports should contain detailed snapshots of how you’ve managed those financial obligations.
- Credit scoring models analyze your reports. Companies like FICO and VantageScore develop credit scoring models to evaluate the data in your credit reports and calculate your credit scores. The job of a standard credit score is to predict the likelihood that you’ll make a late payment (90 days late or worse) within the next 24 months.
- Lenders use your credit information to make decisions. Your credit reports and scores help lenders determine whether you’re eligible for new financing products, what interest rates to offer you and the terms of new loans or credit cards.
According to a LendingTree study, the average American has a FICO Score of 715 and a VantageScore of 702 — both of which are considered to be good credit scores. In fact, over 70% of Americans have a good FICO Score of 670 or higher.
The big three: Equifax, Experian and TransUnion
The United States has three major credit reporting agencies: Equifax, Experian and TransUnion. Each credit bureau maintains its own separate database; as a result, your credit report may differ slightly between each agency.
| Credit bureau | What to know | Credit factor breakdown | Credit score range | Unique features |
|---|---|---|---|---|
| Equifax | Founded in 1899, Equifax is the oldest credit bureau. It has over 15,000 employees and maintains data on more than 220 million U.S. consumers. | FICO Scores consider payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%)VantageScores (4.0) consider payment history (41%), depth of credit (20%), credit utilization (20%), recent credit (11%), balances (6%), available credit (2%) | Base FICO Scores and VantageScore credit scores: 300-850FICO industry-specific credit scores: 250-900 | Offers Equifax Core Credit™, a free credit report and credit score monitoring service. |
| Experian | Established as a credit reporting company in 1996, operates in over 40 countries and maintains data on more than 1.5 billion consumers and 201 million businesses. | Same as above | Same as above | Provides free credit monitoring and Experian Boost, which lets consumers add eligible bills to their credit file. |
| TransUnion | Founded in 1968, now tracks data on over 1 billion consumers throughout more than 30 countries. | Same as above | Same as above | Offers free daily credit monitoring of TransUnion credit reports and credit scores. |
What information is in your credit report
Your credit report contains detailed personal information and, if you’ve established credit accounts, typically also presents information about those financial obligations as well. Each credit bureau’s credit report may look a bit different since not all lenders report data to all three.
Here’s a closer look at the information you might find on your credit report.
- Personal identifying information: Your credit report contains information credit bureaus can use to identify you, like your name, address, date of birth and Social Security number. Credit scoring models (like FICO and VantageScore) don’t use this information to calculate your credit scores.
- Account details: Lenders and creditors (also known as data furnishers) share information about your credit obligations with the credit bureaus. Information about these accounts appears on your credit reports — for example, the account type (e.g., credit card, auto loan, mortgage, etc.), the date you opened your account, credit limit or loan amount and balances.
- Payment history: Your payment history on credit obligations also appears on your credit reports, including on-time, late and missed payments. Typically, a late payment has to be at least 30 days past the due date before a creditor reports the delinquency to the credit bureaus. But if a late payment does appear on your credit report, it can stay there for up to seven years and may have a significant impact on your credit score.
- Credit inquiries: Records of access to your credit file (by yourself and others) also appear on your credit report — they’re called credit inquiries. Hard inquiries occur when you apply for new credit and may affect your credit score. Soft inquiries happen when you review your own credit report; these have no credit score impact.
- Public records and collections: If you file for bankruptcy protection from creditors, those public records could show up on your credit report. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years, while Chapter 13 can stay on your report for up to seven years. Collection accounts can also appear on your credit report for up to seven years. These types of negative items can damage your credit score.
LendingTree Spring gives you free access to credit alerts, score updates and personalized financial tips. Create a free account and work toward better financial and credit habits.
How to fix errors on your credit report
Accurate negative information can remain on your credit report for seven to 10 years. But credit reporting mistakes can also happen. A recent survey found that 44 percent of consumers identified at least one error when they reviewed their credit report.
On a positive note, the Fair Credit Reporting Act (FCRA) empowers you to dispute inaccurate information on your credit report. If you find a credit error on your credit report from Equifax, Experian or TransUnion, follow these steps.
- Get your free credit report. Visit AnnualCreditReport.com to download a free report from each credit bureau (as often as once a week).
- Closely look over your credit reports. Once you have your credit reports, review them for accuracy. Common errors may include accounts you don’t recognize, duplicate items or incorrect payment details. Make sure that personal details, like your name and address, match your current information as well.
- Contact the credit bureau(s). If you discover an error, contact the appropriate credit bureau(s) and consider reaching out to the reporting lender or creditor, too. Here’s how to contact each credit bureau online, by mail, or via phone.
- Provide supporting documentation. For best results, include documentation that proves the disputed information on your credit report is incorrect. Billing statements, payment confirmations or correspondence with creditors could all be good choices here. It’s also helpful to include proof of your identity (e.g., driver’s license and Social Security card) and your current address (e.g., current utility bill) with your dispute.
- Wait for the investigation to finish. Each credit bureau must investigate and respond to your dispute within 30 to 45 days (depending on where you requested your credit report). Further, if you submit additional information during the initial 30 days, it could extend the investigation period by another 15 days. After the credit bureau completes their review of your file, it’ll need to either verify that the data is accurate, or correct or remove the inaccurate information from your credit report. Either way, you should receive an update.
Why credit bureaus are important for your financial health
Credit bureaus — and, more specifically, the data the credit bureaus collect about you — can have a big influence over your financial decisions. Your credit reports and credit scores help shape your overall financial health. Understanding this importance and working to earn good credit could empower you in many ways, including the following.
- Qualify for loans, credit cards or mortgages. When you apply for new financing products, lenders often review your credit reports from Equifax, Experian and/or TransUnion to decide whether to approve your application. Even though credit isn’t the only detail lenders consider, a strong credit profile could improve your chances of qualifying.
- Secure housing or utilities. Landlords and utility companies also rely on credit to assess the risk of new applicants. Good credit may help you qualify without a large deposit, and it could help you avoid the need for a cosigner.
- Get lower insurance rates. In many states, insurance companies use credit-based insurance scores to predict risk and price premiums. Bad credit car insurance and home insurance could be more expensive — in contrast, having good credit could save you on insurance costs.
- Savings over time. Checking and monitoring your credit reports is crucial and could help you raise your credit score over time. Working to improve your credit matters because it could result in meaningful savings. A recent LendingTree study found that improving your credit score from fair to very good could save you more than $39,000 on common debts like credit cards, mortgages, personal loans and auto loans.
Frequently asked questions
The three major credit bureaus collect, organize and maintain your personal financial information into reports that lenders can purchase and use to evaluate your creditworthiness. Credit bureaus don’t make lending decisions; instead, they provide data that helps lenders do so more efficiently.
The credit bureaus receive your information from data furnishers like lenders, credit card issuers, creditors and collections agencies. These types of businesses share your account activity with one or more credit bureaus (typically on a monthly basis).
No, the credit bureaus aren’t government agencies. They are individual companies that the government regulates, and they’re required to follow consumer protection laws like the Fair Credit Reporting act to ensure data accuracy and fairness.
You can request free copies of your credit reports from all three credit bureaus online at AnnualCreditReport.com.
The Fair Credit Reporting Act gives you the right to dispute inaccurate information that appears on your credit report. Paying bills on time and reducing your credit card debt can also be smart, actionable ways to build credit over time.
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