Credit Bureaus and How Credit is Reported

According to the FICO credit scores, 20% of Americans have a score between 800 and 850, and 25% fall into the category with scores between 740 and 799. But many people don’t really understand how scores work, and how credit is reported to the credit bureaus. Do you want to find out more about the matter? Luckily, we have the information that will help you get your answer.

What Are Credit Bureaus?

Credit bureaus are agencies that must research someone’s credit information after collecting it. Once they do this, they have to sell it for a fee to creditors, who are then going to decide whether they should grant someone a loan or not.

A credit bureau is usually going to be a partner with multiple lending institutions, as well as credit issuers. Their job is to help these issuers and institutions make loan decisions. So, for instance, when someone is requesting a loan, the credit bureau will be able to determine if granting the loan would be risky to the lender, or if everything seems to be okay. For instance, someone with a small credit score would be a pretty huge risk to deal with, because they may be unlikely to repay a loan on time.

The biggest credit bureaus known in the United States are Experian, Equifax, and TransUnion. Of course, there are other companies that do the same thing as these three, but they are not as popular as them so most people don’t always know their names.

Credit bureaus often have multiple types of clients, such as credit card issuers, mortgage lenders, banks, and many other similar companies in the financial branch. However, you should keep in mind that it is not the credit bureaus themselves deciding who should have their credit granted to them. Instead, what they do is collect information about a person’s credit history and credit score. The things they find are then given to the lending institutions so they could make a decision based on these details.

It’s also possible for consumers to be customers of these credit bureaus, and they get the same services, respectively information about their credit history.

What Are the Top 3 Credit Bureaus?

As mentioned earlier, there are multiple credit bureaus in the United States, and all of them do the same thing. But among all of them, three shine the brightest: Experian, Equifax, and TransUnion. They are the most famous credit bureaus and are often in the front lines when it comes to collecting information about people and sending it to the lending institutions.

Equifax

Equifax is not operating in the U.S. alone. Although it’s based in Atlanta, it also has operations in 18 other countries, which include Brazil, Argentina, Costa Rica, Chile, Canada, Ecuador, Honduras, El Salvador, Portugal, Peru, Russia, Spain, Uruguay, and the United Kingdom. It has 7,000 employees, and it’s especially a dominating force in the eastern and southern parts of the U.S. According to it, it’s pretty much a market leader in most countries where it operates.

Experian

Experian claims to be the “leading global information services company”. The domestic headquarters of the company are in Costa Mesa, California. Initially, it dealt with reports in the western part of the United States. Its corporate headquarters are in Dublin, Ireland, and operational headquarters in Nottingham, UK, and Sao Paulo, Brazil. It also has about 16,000 employees in 39 countries. So, it’s safe to say it’s a very big company.

TransUnion

TransUnion also claims to be a global leader when it comes to credit information, as well as information management services. The company has about 3,700 employees and it operates in 33 countries. Also, you should know that it’s based in Chicago.

What Is a Credit Report?

A credit report represents a summary of the way you dealt with your credit accounts. It shows how you handled them, as well as your payment history and other information regarding your financial situation.

In general, credit reports will help make a decision when it comes to a lender trying to figure out if they should give someone a loan or not. Just like that, a potential employer may also check out your credit report to decide if they should hire you or not. If you’re also applying for services like utilities, phone, or anything of the sort, a credit report may be reviewed for insurance purposes as well.

In order to make sure you will have an advantage most times, you must check your credit report regularly to make sure the information is complete and accurate.

How Are Credit Reports Determined?

Credit reports are determined by collecting certain types of information.

First of all, the credit bureau will identify your personal information, which often includes your name, date of birth, and Social Security Number. This is only used for identification purposes and not to calculate your score.

Your credit account information will also be collected, and this includes the types of accounts you opened, as well as when you opened them, your account balances, credit limit or loan amount, and the payment history.

Then, inquiry information will be collected as well. For instance, this includes hard inquiries and soft inquiries. For instance, soft inquiries will come from your current creditors or lenders performing some periodic reviews of your accounts, like reviewing your account. They can also come from companies extending your pre-approved offers, and from you checking your own credit reports. But it’s essential to keep in mind that soft inquiries don’t have an impact on your credit score.

Meanwhile, you have hard inquiries, which will impact credit scores negatively. These inquiries happen when loan servicers or credit card companies review your credit report due to you applying for a service or a credit. This could include a credit card, a mobile phone contract, or a new loan. The inquiries will remain on your credit report for around two years and as time goes by, the impact may decrease.

Bankruptcies are included on your credit report too. If you have bankruptcy public reports, then information about it will be added to the credit report. Other details, like the filing chapter and date, will also be included.

Collection accounts will be added to the credit report and will somehow have an influence on the situation. These include past-due accounts that were turned over to collection agencies. For example, these could be your credit accounts, but also your accounts with banks, hospitals, doctors, cable companies, mobile phone providers, and other similar things.

All of these factors determine your credit report and make it unique based on your details.

The Bottom Line

Now that you reached the end of this article, you know more about credit bureaus and how credit is reported. The credit report is very important as it can influence whether you’re able to take out a loan or to get a certain job. This is why you always need to make sure you have good financial behavior, and you don’t do anything that decreases your score or makes you seem risky.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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