8 Facts Everyone Needs to Know About the Credit Bureaus

Understand how credit agencies work to get the most out of your credit report.

Three major U.S. credit bureaus make decisions about your credit that can cost — or save — you tens of thousands of dollars. Whether you want to improve your credit, apply for a loan, receive the best interest rates from a lender or even rent an apartment, you need to understand how these credit bureaus work. The three major credit bureaus are:

  • Experian
  • TransUnion
  • Equifax

Understand how credit reporting bureaus work so you can get a handle on how your credit score is figured and how it’s shared. Review these eight facts about the three major credit bureaus, then figure out how to improve your credit score so you get the best credit report possible.

1. The Three Credit Bureaus Work the Same Way

The biggest three credit bureaus all do the same thing — collect information on consumers and businesses regarding their abilities to pay back loans. The bureaus offer a wide range of financial services and products — including ID theft protection, credit monitoring, credit reports and credit scores — and serve similar types of customers, like mortgage brokers, auto dealers and debt collectors.

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Most bureau differences relate to size and market. For example, Experian is the largest in terms of sales with about $4.3 billion in annual revenue, and it also has the most sales outside the U.S. Equifax comes in second with about $3.1 billion in annual revenue, followed by TransUnion with approximately $1.7 billion.

Find Out: 8 Ways to Raise Your Credit Score in 2017

2. Credit Bureaus Collect Information From Data Furnishers

Credit bureaus collect information from what the industry calls data furnishers, which are banks, mortgage companies and other businesses that have established relationships with the credit rating agencies. Data furnishers are legally obligated to provide correct information to the agencies when they report their payment experiences with consumers. The bureaus combine this information with data they collect themselves.

3. Credit Bureaus Can Sell Your Information

Credit bureaus sell your information to any business or person who wants to know your history of paying back loans. For example, Equifax sells information to debt collectors, according to its annual report. Here are types of companies and organizations that might want to access your credit history:

  • Electronics or appliance stores
  • Car dealerships
  • Apartment management companies
  • Mortgage lenders
  • Hospitals
  • Employers
  • Auto insurance companies
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Check Out: 9 Credit Report Myths You Need to Know

4. You Have Rights Concerning Credit Bureaus

A mix of government and state agencies exist to safeguard your rights regarding credit bureaus. The U.S. Fair Credit Reporting Act enables you to contest the accuracy, fairness and privacy of information provided by credit bureaus. The Dodd-Frank Act of 2010 created the Consumer Financial Protection Bureau to monitor the industry.

You have the right to contest a debt’s validity. If you do contest a debt, the credit bureau puts a note on your account indicating that it is in dispute. If the credit bureau’s investigation doesn’t resolve the dispute, you can send the bureau a brief statement about the issue and request that it’s included in your file and summarized on your future reports. If a company provides the wrong information to a credit bureau and corrects the information because of the consumer’s dispute, it’s obligated to forward the correction to everyone to whom it sent the incorrect information.

If you live outside the U.S. you might have even more protection. Foreign data and consumer protection, privacy and other laws and regulations are often more restrictive than those in the U.S., according to Equifax’s annual report.

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5. Good Credit Score Parameters

So exactly what is a good credit score? FICO scores are a popular way to measure credit scores — the system assigns you a three-digit number that indicates your ability to pay back loans. FICO scores range from 300 to 850, and the national average FICO score is 695.

Here’s how the FICO scores break down:

  • Exceptional — 800 and above:  Only 1 percent of these borrowers are likely to become seriously delinquent, according to Experian.
  • Very good — 740 to 799: About 2 percent of these consumers might become seriously delinquent.
  • Good — 670 to 739:  Approximately 8 percent of these borrowers might become seriously delinquent.
  • Fair — 580 to 669:  About 28 percent of people in this bracket will become seriously delinquent.
  • Poor — Below 580: Around 61 percent of these borrowers will become seriously delinquent.

Learn: FICO Score vs. Credit Score — What the Difference Means for You

6. Credit Scores Can Differ

Credit rating agencies collect their data from a variety of lenders and run it through a model designed by FICO but each agency tweaks its formulas. Although FICO assigns scores from 300 to 850, some industries use a different system that can assign scores anywhere from 250 to 900.

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Some companies provide an “educational” credit score instead of a score a lender would use. An educational credit score is based on a private lender or credit bureau’s ranking of your financial information and is designed to give you a basic idea of what your risk level is in the eyes of lenders. In other words, educational scores are for consumers’ use only.

7. Agencies Make Mistakes

Credit bureaus were among three of the top six most complained about consumer companies in the U.S., according to a CFPB report released in February 2017 that tracked data from the previous six years. The leading complaint about credit bureaus was incorrect information, followed by a failure to investigate and last, an inability to obtain a report.

Equifax received 42,172 complaints, placing it third among the 10 most complained about companies since the CFPB began accepting complaints in 2011. Experian placed fourth, with 39,990 complaints and TransUnion came in sixth with 34,279 complaints.

Each of the three credit rating agencies misrepresented information about the credit scores they marketed and provided to consumers, according to the CFPB report. Equifax and TransUnion falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only $1, according to the CFPB. Experian failed to provide a free credit report once every 12 months as required by law, the agency added.

Consumers who signed up and received a free trial for seven or 30 days were automatically enrolled in a subscription program, according to the CFPB. Unless they canceled their subscription during the trial period, they were charged a recurring fee — usually $16 or more per month. This billing structure, known as a “negative option,” was not clearly and conspicuously disclosed to consumers, according to the CFPB.

TransUnion and Experian were each ordered to pay a fine of $3 million to the CFPB’s civil penalty fund and Equifax had to pay $2.5 million. TransUnion also had to pay $13.9 million in restitution, and Equifax paid $3.8 million.

Related: 10 Best Credit Repair Companies

8. You Are Entitled to a Free Credit Report

The difference between a credit report and a credit score is significant: A credit report provides a list of your debtors whereas a credit score ranks your ability to pay a loan. You’re entitled to a free credit report annually from each of the three big credit bureaus.

The only website authorized by law to provide a free annual credit report is AnnualCreditReport.com. Keep in mind, however, that even if the website domain name has the word “free” in its address, it’s not required by the federal government to provide credit reports for free, according to the CFPB.

The Fair Credit Reporting Act enables credit bureaus to charge a fee for credit scores. You can buy a score directly from the credit bureaus or at myFICO.com. You can also check your credit score a number of different ways, such as visiting GOFreeCredit.com.

You can also get a free score in some circumstances — like when you apply for a mortgage — if you have a credit application turned down or if you get a loan rate that’s less favorable than most people get from that lender.

Next Up: How to Read a Credit Report

Peter Brennan contributed to the reporting for this article. 

GOBankingRates.com and GOFreeCredit.com are both owned by ConsumerTrack, Inc., an online marketing company serving top-tier banks, credit unions and other financial services organizations.

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About the Author

Barri Segal

Barri Segal has 20+ years of experience in the publishing and advertising industries, writing and editing for all styles, genres, mediums, and audiences. She has been writing on personal finance topics for 12 years and gains great satisfaction from making a difference in consumers’ lives.

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