What's a credit bureau?

Article brought to you by Ollo and authored by Shannon McLay, Personal Finance Expert and Published Author.

All credit scores are based on information from credit reporting agencies or credit bureaus, yet it seems as though you don’t hear much information on what these bureaus are and how to work with them.

Who are they?

There are three major credit bureaus, Experian, TransUnion and Equifax.

What they do?

Each of these bureaus collects data on you that is primarily utilized for generating credit scores and making lending decisions. The type of data they collect includes:

  1. Personal Information
    This is the information you provide to lenders when you apply for credit such as your name, social security number, birth date, address and employment information.

  2. Lender Information
    This is information based on your activity with the lender such as the type of credit you have, the amount you have available, how much you’ve borrowed and how well you have been paying the lender.

  3. Credit Requests / Inquiries
    Every time that you apply for new credit whether it’s a new credit card or a car loan, the lender reports your request to the credit bureaus.

  4. Public Information
    This information is based on public records such as bankruptcies, foreclosures, tax liens, garnishments, legal suits and judgments as well as overdue debt reported by collection agencies.

Why should I care about the credit bureaus?

The information that is housed at the credit bureaus gives a snapshot of your credit worthiness to lenders. It lets them know who you are, what type of borrower you are, how much you want to borrow and any negative information that a lender should know about you. Essentially the credit bureaus tell a story about you to lenders and you want to make sure that the story they tell is not only a good one but also an accurate one.

As far as telling a good story, this is completely within your control. If you manage your credit history responsibly by borrowing within your means and paying your bills on time, then you will have a positive story within your credit report and this will translate into higher credit scores.

It’s not enough, though, to just rely on your history and what’s reported to the credit bureaus. You are entitled to receive one free copy of your credit report from each bureau once a year through www.AnnualCreditReport.com; and you should take advantage of this to confirm that your information is correct with each bureau.

Not all lenders report information to all credit bureaus; however, the basics about you should be the same at each one, such as your name and other personal information. If this is not correct, you could be denied credit from a lender because of the inconsistencies in your reports.

You may also want to monitor your credit score as well as your credit reports for any unusual activity. Situations like identity theft and fraud are not uncommon. Scary thought, but it happens more than you may think.

It may also be the case that information on your bureau is not completely accurate. If you do find inconsistencies in your report, it’s up to you to fix it. The first thing you should consider doing is addressing the inconsistencies with the bureaus directly. After that, you should address the problems with the lenders directly to make sure that they update their information on you with the bureaus. The Federal Trade Commission provides a sample dispute letter online. Credit bureaus will investigate the items in question – usually within 30 days of receiving your letter. They will also work with the companies providing the information to review the information. When the investigation is complete, you will receive the results of the review in writing. If information is found to be inaccurate, the information will be updated on your credit bureau.

Why are my credit scores different at each bureau?

Your credit scores, such as your FICO® Score, are based on the information on your credit bureau reports. When you apply for credit, you will see that sometimes your scores are different at each bureau. The main reason for the discrepancy in scores is that not all lenders report information to all three bureaus. In addition, each bureau receives and updates their information on you at different times and your FICO Score is based on a snapshot of your credit report at any given moment; therefore, your information could look different at each bureau.

Typically, though, your FICO Scores at each bureau are within the same range for example, if you are an excellent credit at TransUnion you are likely an excellent credit at Equifax. This is not always the case, though, and it’s important before you make a large purchase for you to check all of your credit reports and make sure your information is accurate and up to date on all as lenders may take an average of your scores or sometimes even the lowest of your FICO scores when making a lending decision; and you don’t want the information from one bureau to cost you money over the life of your loan.

How do you reach them?

Each of the credit bureaus offers credit report assistance at no cost to you. If you need to reach them, here is their contact information:

This article is provided to you solely for education purposes. It is not intended to provide you with any specific legal, investment or financial advice and you should not solely rely upon this in making financial decisions.