Differences Between 3 Credit Bureaus
Even in today's transparent world, the mere thought of credit bureaus, credit reports and credit scores tends to make us cringe. This is no doubt due in part to the fact that just over a decade ago, the average consumer had no access to his or her credit information. That privilege was afforded only to lenders in determining your credit risk while you sat by chewing your fingernails to nubs and praying that your credit score is sufficient to be considered creditworthy.
What is a Credit Bureau?
Credit bureaus are the Clydesdales of the credit industry. These companies are not lenders, but they are the agencies that house billions of credit histories on consumers and commercial entities. Lenders look to the credit reporting agencies for the data used to determine credit worthiness.
What are the Big 3 Credit Bureaus?
At one time there were somewhere between 1000 to 1200 credit bureaus at local and regional levels throughout the United States. Over time, the emergent "Big 3" credit scores warehouses bought or contracted with the smaller credit reporting agencies. The Big 3 are Equifax, TransUnion and Experian.
The industry remained pretty much unregulated from its inception in 1899 through the 1960s and 1970s until Congress passed the Fair US Credit Reporting Act. The purpose of the act was to organize and control how these agencies collected, disseminated and used consumer information.
Why Does Your Credit Score Differ from Each Agency?
Creditors and lenders regularly update the credit bureaus with your unique information and assemble it into a comprehensive credit report. This information is generally the same across the board:
- Date of birth
- Social Security number
- Current and former addresses
- Employment information
- Address, telephone number and email address.
- Former and current employers
- Your spouse's name, Social Security number and employment data
- Bankruptcies, judgments, other legal actions and public information
- Payment history
- Current debt ratio
- Longevity of credit history
- Combined balance owed and credit limit on open revolving credit cards
- Credit application inquiries
While the information collected is fairly standard, your credit score from the three credit bureaus varies greatly, possibly as much as 40 points between the three. Each agency uses its own mathematical formula to issue a credit score that is an indicator of your credit risk to a lender. Here is a breakdown of the differences:
- The PLUS Score is Experian's scoring method. Its approach is to provide a better understanding of what its credit score means, the factors used and how to improve it.
- The Equifax Credit Score™ predicts credit risk. The scores range from 280 to 850. The higher your credit score, the lower your credit risk.
- The TransRisk is TransUnion's consumer credit score. It is similar to the Fair Isaac Corporation (FICO) score with ranges of 300 to 850.
Lenders have utilized these credit scores for over 20 years in making credit and loan decisions, which is why you so often hear that you must obtain the three credit scores to know your true credit standing. Equifax, TransUnion and Experian all offer a 3-in-1 report to make it easier to obtain a complete free annual credit report.
While credit reporting agencies, credit reports and credit scores have been a source of anxiety for many people over the years, you will be pleasantly surprised to learn that the Big 3 credit bureaus make a conscious effort to be consumer-friendly these days. Each one offers a variety of services and information designed to educate the consumer.
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- Differences Between 3 Credit Bureaus