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What Do Credit Bureaus Do?

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Your credit report tells a lot about how you manage financial responsibilities. Lenders, insurers, telephone and utility companies, landlords, employers and others rely on your credit report. A lender may use it to decide whether to provide you with a credit card and what interest rate to charge you. A landlord might use your credit report to decide whether they will select you to rent their apartment based on your history of paying bills on time.

The information on your credit report includes identifying information like your name, address, full or partial Social Security number and birthday. The meat of the report shows existing credit information including credit card accounts, mortgages, car loans and student loans. It also contains public information such as court judgments against you or tax liens, and a list of companies or people who recently requested a copy of your report.

The companies that collect, manage and update this information in your credit report are called credit bureaus. The three major credit bureaus are Equifax, Experian and TransUnion. They gather information from your creditors, such as banks, credit card companies and car financing companies. They also collect information from public records such as court and property records. “Each credit bureau gets its information from different sources, so the information in one credit bureau’s report may not be the same as the information in another credit bureau’s report,” noted a Consumer’s Guide published by the Board of Governors of the Federal Reserve System.

The history of credit bureaus

Back in the 18th century, country storekeepers were granted loans after reputable neighbors simply vouched for their character to bankers or merchants, according to Time magazine. Credit reporting began to emerge more distinctly in the 1820s, specifically for business people, given new bankruptcy laws.

In 1841, the Mercantile Agency began collecting notes about debtors’ character and assets, and compiled these reports in ledgers in New York City. However, these reports were very subjective, and the accuracy was questionable. In 1859, the Mercantile Agency was renamed R. G. Dun and Company. It created an alphanumeric system that took hold until the 20th century. R. G. Dun and Company later merged with another company to become Dun & Bradstreet.

By the end of the Civil War, the U.S. had three pillars of credit reporting: private-sector mass surveillance, bureaucratic information-sharing and a rating system, according to Time magazine. Half a century later, these pillars, which began for commercial lending, were carried over to evaluate the credit of consumers.

Credit managers employed by retailers would decide whether to grant generous lines of credit to consumers. Companies like Atlanta’s Retail Credit Company (RCC), which was founded in 1899, gathered information on millions of Americans. These reports included data like credit, capital, character, sexual preferences and political views, according to Time.

This movement brought on many privacy concerns that stemmed from the type of data that was collected. Then, in 1970, the government passed the Fair Credit Reporting Act, which required bureaus to open their files to the public, delete negative information after a specified amount of time and omit information on race, sexuality and disability. In 1975, RCC was renamed Equifax. Eventually, Equifax, Experian and TransUnion formed the “Big Three” consumer credit reporting agencies.

The big three firms eventually joined forces with a company named Fair, Isaac and Company — now known as FICO — to develop a credit-scoring algorithm and create an industry-standard credit score, ranked on a scale of 300 to 850. Different lenders have their own standards for rating credit scores, but FICO considers a score between 670 and 739 a good credit score.

In 2006, the big three credit bureaus created another scoring model called VantageScore, to create “a more predictive scoring model that is easy to understand and apply.” VantageScore credit scores range from 300 to 850 as well, with a score of 750 or higher considered excellent.

Why credit bureaus matter

Credit bureaus provide information in the form of a credit report to lenders, which decide whether to grant you credit. The higher your credit score is, the more trustworthy you appear to lenders. If you have a good credit score, you’re more likely to be approved for credit and given a favorable interest rate.

It’s important to note that negative credit information stays on your credit report for seven years. If you file for personal bankruptcy, that stays on your report for 10 years. Information about criminal convictions may stay on your report indefinitely, according to the Board of Governors of the Federal Reserve System.

The ‘Big Three’ credit bureaus

In the U.S., the three national credit bureaus — Equifax, Experian and TransUnion — compete to manage and update credit histories for consumers. Most of the information collected by the three agencies is similar, but there are some slight differences since each bureau reports credit history in its own way.

What to watch out for

The credit reports created by credit bureaus can be particularly helpful in detecting fraudulent activity. For example, a credit report could tell you whether an identity thief opened up a line of credit in your name. It’s important to routinely monitor your credit reports for any red flags.

Look for errors. If you find any, you can dispute credit report mistakes by contacting the credit bureau. You can contact the credit bureaus here:

You can also contact the company that provided the information to the credit bureaus, such as a mortgage lending company or a student loan provider, to dispute any incorrect information.

On the other hand, credit bureaus themselves can be targets of a data breach. In 2017, an Equifax data breach exposed the sensitive personal information of 143 million Americans, according to the Federal Trade Commission. Hackers accessed people’s names, Social Security numbers, birthdates, addresses and in some instances, driver’s license numbers, according to the Federal Trade Commission.

You can see whether you were affected by visiting the Equifax Cybersecurity Incident page.  Click “Am I Impacted?” and enter your last name and the last six digits of your Social Security number.

If you may have been impacted, you should get free copies of your credit report from the three major credit bureaus at Consider placing a security freeze or credit lock on your credit report by contacting the three major bureaus. The Equifax Cybersecurity Incident page has more information.

It’s important to obtain your free credit report each year and keep an eye on your credit scores. Your credit reports can have a major impact on how much credit you’re granted and whether you are chosen for a new apartment, home mortgage or even a promising new job. In a way, it’s a ticket of opportunity for your future. Just remember to continue to pay your bills on time and remain in good financial standing.


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