Credit Bureaus | Find Out How They Work And Why They Are Important?

how credit bureaus work

Have you every looked at your credit report and wondered “Who is gathering all this information and why?” The answer is: The credit bureaus! These agencies collect and store information such as your payment history, pending debt, credit card accounts etc. On the basis of these your overall credit score is calculated. If the first thing that crossed your mind on reading this was that a better report presented by the bureau would mean a higher score and ultimately a better chance of scoring low interest rates and better credit card offers, then YES, you are 110% right! In fact, that is why the credit bureaus are considered so important.

How Do Credit Bureaus Work?

The 3 major bureaus you will come across are Experian, Equifax and TransUnion. Although there are other reporting agencies, most of them work using the same principles. They aim at gathering different type of financial information about consumers such as their accounts and credit history. Then using this information, these companies will draw out a report and credit scores.

The report formulated by the companies can be used by creditors and lenders when you apply for a credit card or may be a loan. They need this information to decide whether they should open their services for you or not. If you want to keep check on how good you are doing financially, you can opt for a free credit report once a year from each of the three major credit bureaus.

How Do They Get Your Information?

The agencies have definitely not hired detectives to follow you around. Neither do they have any plans of setting up cameras to keep an eye on you. Then. how the do the credit reporting agencies get the information they need? It’s simple! They ask the right people about you.

  • The first-hand information is obtained from banks and credit card issuers who report how good you are as a customer, your accounts, debts, payments history etc. These creditors are often referred to as “data furnishers”.
  • Some data is also bought by the bureaus from other agencies. For example, LexisNexis collects public records about consumers. Similarly, the CLUE is known to collect data on personal property. When the major bureaus are preparing your credit report, they can often buy this data and include it in the record.
  • The three major credit bureaus also report the data within themselves. Although they are competitors, they will not hesitate sharing the data and information on you if deemed necessary. Typically, if you have been involved in any fraud with one of the agencies, the other two will be immediately made aware.

Who Will Use The Information Given Out By Credit Bureaus?

The most obvious answer to this question is: lenders and creditors. Every time you apply for a credit card, the bank or the issuer will most probably check out your credit report given by the major credit bureaus in order to decide whether you are a reliable applicant or not. In addition to these, different employers, landlords, debt takers, and a number of insurance companies will turn to the major credit reporting agencies to request information on you.

You might wonder how credit bureaus help them? They do so by saving their time and providing a pre-screened list of users and consumers who deserve the services and others who might prove to be a liability. For example, credit reporting agencies prepare lists of users who have high credit card balances or a list of consumers who those have a history of poor credit scores. The credit card companies can then access this data to send out offers for balance transfers or withhold credit card offers from those with less reliable financial history.

The 3 Major Credit Bureaus

The three biggest credit reporting agencies are Equifax, TransUnion and Experian. Although there are a number of other active bureaus, these companies are the ones lenders and creditors will turn to when they check your credit. Reports given out by the 3 major credit bureaus can differ by bits and pieces. Nonetheless, each will elaborately show how financially responsible you are.

3 major credit bureaus

These agencies recieve your information from different lenders who continuously report how punctual you are with payments and how much debt you owe them. The credit bureaus also have the right to pull out public records such as bankruptcy information or tax liens. They can further sell the data to other companies who are screening you as an applicant for their product or services. This is very common when you apply for a credit or a loan and the company runs a check on your credit history to see if you are trustworthy. Moreover, the agency does not need your permission to do so. However, any employer or a landlord requires a written permission letter in order to access your credit report.


Equifax is one of the best credit bureaus that most of the lenders and creditors rely on. The company has constantly updated itself with services like fraud protection and identity theft to ensure the users have the best experience here!

Did you know? “Equifax has been around since 1899, and they operate or have investments in 24 countries. In 2017, Equifax’s reputation was blemished when it was hacked and suffered a data breach that divulged the critical personal information of 147 million consumers.”

With Equifax, consumers can choose to purchase credit monitoring services. This would also include Equifax credit scores. After taking the dip in 2017 due to a privacy breach case, Equifax has now made a feature available to all its users to keep a check on their accounts and see if they have been affected in any way. Furthermore, the company also offered a free credit monitoring service to all those whose information was stole during the breach.


TransUnion originated in 1968, although it took the company about 20 years to develop into a functional credit reporting agency and gather information on all the market-active citizens in the US. Currently, they hold data on more than a billion consumers from 30+ countries. Another plus is that TransUnion also lets you freeze your account instantly if you think you have been targeted for identity theft or fraud of any type. It will also inform the other two major credit bureaus that you have done so.


The last in line for the major bureaus is the Experian credit reporting agency. Currently it uses FICO 8 score system to calculate your credit score. The agency is also offering a Credit Tracker service at the time of subscription. In just $20 per month you will be able to keep a check on your score and other essentials on the credit report.

Fun Fact! “Experian got its start in London when business-people there began sharing information on customers who did not pay their bills. These business-people formed the Manchester Guardian Society in 1826, which later became an integral part of Experian and reached around the world. Experian employs over 16,500 people in 39 countries and was named one of the “World’s Most Innovative Companies” by Forbes in 2018.”

Other Credit Bureaus

Are the 3 major bureaus the only working credit reporting agencies? Not at all! In fact, there are many other companies that carry out the same task. The Consumer Financial Protection Bureau has compiled a long list of reliable agencies that collect and organize financial data in form of credit report. However, you might need to contact them yourself if you want to obtain a free report. Here are few you should know about:

  • ChexSystems: Collects and reports information mostly on savings and closed accounts.
  • National Consumer Telecom and Utilities Exchange: Collects and reports information for TV, telecommunication and utility industries.
  • Comprehensive Loss Underwriting Exchange: Reports information regarding consumer’s personal property.
  • LexisNexis Risk Solutions: Collects and reports consumer’s public records and services.

How To Get In Touch With The Credit Bureaus

To contact the credit bureaus you can visit their official websites at any time or access them via mail/call.


Phone: 800-685-1111

Mail: P.O. Box 105788, Atlanta, GA 30348-5788


Phone: 800-909-8872

Mail: P.O. Box 2000, Chester, PA 19016


Phone: 888-397-3742

Mail: P.O. Box 9554, Allen, TX 75013

Frequently Asked Questions

1. Do credit reports and scores differ depending on different credit bureaus?

Ans. Credit reports and scores can be different depending on which bureau you are using at the instant. This is because each of them relies on different credit scoring model. Different models take in to account various types of information and are used for different purposes. For example, the score used to determine your worth as a credit card holder might be different than the score lenders will look at when deciding auto loans risk.

2. Have any laws been set up regarding how different credit bureaus work?

Ans. Yes. The FCRA or The Fair Credit Reporting Act has been imposed on all the credit bureaus that highlights how such agencies should operate. According to FCRA, all the consumers have the right to an accurate, completely reliable credit report. They are also allowed to dispute error, if any, on the report. Consequently, the credit bureau will then be under the obligation to carry out an investigation and correct errors whenever necessary.

3. Can you get a credit report for free?

Ans. According to the FCRA, every user has a right to one free credit report in a year from the all the three major credit bureaus. You can also get a report without any charges when an application is denied due to some piece of information on your report. This is also applicable when you are on welfare or have been a target or any fraud or identity theft.

People Are Also Asking

4. Is FICO also a credit reporting bureau?

Ans. FICO is a name well known in the credit industry. This is because it developed the FICO score and currently maintains the best scoring model. However, keep in mind that FICO is not a credit reporting agency. It merely compiles your score based on different pieces of data provided on your report by the credit bureaus.

5. Is it possible that my credit report given by different credit bureaus contains errors?

Ans. It is not a hard and fast rule that all the information on your credit report will be 100% accurate. There are chances that mixing of data ends up with your report having information of someone similar to you. In such a case, you have every right to dispute the error. However, the process can be fairly difficult and time-consuming.

Did you know? “According to study carried out the Federal Trade Commission in 2013, every 1 in 20 users have a credit report error. In 2013, an Oregon woman won an $18 million lawsuit against Equifax, one of the big three credit bureaus, after it failed to correct a credit report error that she’s disputed 13 times over the course of two years.”

Wrap Up

Different credit bureaus rely on various type of data and sources to give shape to your final credit report and score. This is one major reason why your reports do not always have exactly same information. That is not a problem at all! But, in case you come across any error always feel free to open a dispute and have it fixed as soon as possible. Getting rid of any error is one of the fastest ways to improve your credit score.

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