What are Credit Bureaus and What do They Do?

Have you ever applied for a credit card, charge account, a personal loan, insurance, or a job? Many times when you apply for loans or a job, the lenders or employers look up a file about you. What's this file? It's called a credit report, and it has information about where you work and live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. Who has this report? These reports are collected by companied called credit bureaus.

Credit Bureaus compile your information and sell it. They do this so that companies can gauge your creditworthiness. They give this information about you to creditors, employers, insurers, and other businesses. Below are some common question and answers about the 3 credit bureaus.

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Once you have decided to access your free credit report without a credit card and have received your credit score, your next challenge is to choose from among the three credit report bureaus (also called "agencies"): Equifax Credit Report Agency, Experian Credit Report Agency, and Trans Union Credit Report Agency.

Which one should you choose? Essentially, they all provide the same important service: providing you with your free credit report, and helping you identify areas where you need to improve, repair, or fix your credit score. The three credit reporting bureaus operate similarly, and major creditors and lenders report information to all three.

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Experian is a Credit Bureau with over 30 years of experience and more than 30,000 clients (companies who use their information to determine who to lend money to). A credit bureau is an agency which compiles and distributes credit information to companies, lenders and creditors. This information typically includes payment history, number of opened and closed credit accounts, the types of credit accounts (revolving, mortgage, automotive), date the accounts were opened, as well as a monthly update on the balance of your accounts. These reports may also include elements of your employment history.

Using a product they call Portfolio Solutions, Experian sells information which lets lenders to know when you have been inquiring about additional credit (the Fair Credit Reporting Act of 1970, as amended in 1996 allows them to do so). Using this information, lenders will often send you advertisements and credit card applications in the mail hoping to gain your business. Since Experian has over 30,000 clients in North America, this translates to a lot of "junk mail" for people across America.

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Since its founding in 1899, Equifax has evolved into one of the three major credit bureaus in the United States. Like many large companies, Equifax has several different divisions; two often mistaken for each other are Equifax Consumer Services, Inc and Equifax Information Services LLC. When most people think about Equifax, they think about their credit report and credit score. The information maintained in your file is done so by Equifax Information Services LLC. The company that makes your Equifax credit information available to you online is Equifax Consumer Services.

Among all of the leading bureaus, Equifax has been among the most proactive, offering and encouraging the public to view their credit reports and corresponding scores. To accomplish this task they have built extensive online services, making it possible to dispute items in the credit report directly online (there is no charge for this service), as well as many other services. Their web address is www.equifax.com.

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In 1968, a railcar leasing company known as Union Tank Car Company created TransUnion as a new reporting company. In the 30 plus years that have followed, TransUnion has become one of the three major credit bureaus in the Unites States.

As a credit bureau, TransUnion receives reports from various lending institutions about the credit history of their clients, becoming a centralized location for storing this information. TransUnion uses this information, along with a formula developed by the Fair Isaac Corporation to develop what TransUnion calls an Empirica score, as well as a credit report. While all major credit bureaus use the Fair Isaac Corporations formula (which produces what is commonly known as a FICA score), each agency names their results differently for marketing purposes.

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