When you think about your credit report, do you ever stop to wonder who’s compiling all of this information about you, and why? How did the idea to monitor people’s financial activity even come about in the first place? Although the concept is a relatively modern one, it’s firmly rooted in today’s society. Read on to learn what are credit reporting agencies (Equifax, Experian, and TransUnion), how they operate, and why you should care.
What Are Credit Reporting Agencies
Credit reporting agencies (also known as CRAs or credit bureaus) create reports detailing people’s financial history and then sell that data to businesses. Credit reports basically help companies figure out if someone is likely to be a responsible borrower.
The data in credit reports are often the basis of our credit scores. CRAs get this data from lenders, utilities companies, and other companies that might report your payment history. They’ll also report such things as your balances and the amount of any open credit lines. One thing that you won’t see on your credit report, however, is your credit score — and that’s because credit scores and credit reports are two separate things created by different companies.
The question is, how did the idea of creating what are essentially financial report cards come along in the first place?
According to a 2012 white paper produced by the Consumer Financial Protection Bureau, the first credit reporting agencies came about in the late 1800s to help merchants understand who not to lend to. Prior to this, someone’s reputation might be the only way to know — and reputation can be very subjective.
The first iteration of credit reporting was simply to keep a list of people who were known to not repay their debts, not totally unlike the way ChexSystems works today in tracking those who bounce checks. Nowadays credit reports show both positive and negative information on consumers.
CRAs are also now bound by the Fair Credit Reporting Act (FCRA). The FCRA is a federal law designed to protect consumers from inaccurate credit reporting. And, thanks to the FCRA, consumers have a right to view their credit reports for free annually.
How to Get Free Credit Reports
Believe it or not, you don’t have to go to the CRAs to get a copy of your credit reports from them. Instead, you can go to AnnualCreditReport.com once per year to view your credit reports from each of the three big CRAs for free.
This is an important distinction, as the CRAs themselves also sell access to your credit reports for a fee. That’s fine if you want to review your reports regularly, but you should at least know that there is a way to see them for free first.
Now that we’ve gotten that cleared up, here are the three main CRAs you should know about.
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Three Credit Reporting Agencies You Need to Know About
- Headquarters: Equifax Inc., Inc., 1550 Peachtree St. NE, Atlanta, GA 30309-2402, United States
- Number of Consumer Records: 210 million worldwide
- Consumer Services Offered: Equifax offers three main consumer products, which range from the ability to view your Equifax credit report as often as you’d like to the ability to receive alerts when changes are made on any of your credit reports from the three CRAs to identity theft protection and more. These services are packaged into a few main products called Equifax Complete™ Premier, Equifax Complete™ Family Plan, Equifax ID Patrol™, Score Watch®, and Lock & Alert™.
- Headquarters: Experian PLC, Newenham House, Northern Cross, Malahide Road, Dublin 17, D17 AY61, Ireland
- Number of Consumer Records: 220 million in the U.S.
- Consumer Services Offered: Experian offers quite a few consumer products, which are broken down into the following: CreditWorks℠ Basic, CreditWorks℠ Premium, 3-Bureau Credit Report and FICO® Scores, IdentityWorks℠ Plus, and IdentityWorks℠ Premium. These products range from identity theft protection to being able to monitor your credit reports and scores on the regular, and more.
- Headquarters: TransUnion, 555 W Adams St., Chicago, 60661-3719, United States
- Number of Consumer Records: One billion worldwide
- Consumer Services Offered: TransUnion’s main consumer product is TransUnion Credit Monitoring, which enables you to receive alerts on updates to your credit, obtain a personalized debt analysis, utilize their Credit Score Simulator Tool to aid in future financial decisions, and more.
Why You Need to Review Your Credit Reports Regularly
As you might have already gathered, the fact that there are three different CRAs means everyone with a credit report likely has three different credit reports. What’s more, one person’s three credit reports aren’t guaranteed to be identical to each other.
When a company reports your financial activity to CRAs, they get to pick which CRAs they want to work with. They might choose one or more, but they aren’t required to work with all three. Therefore, staying on top of your credit reports means regularly reviewing all three of them.
Here’s why that’s important: The information on your credit reports helps inform your credit scores. Your credit scores dictate whether or not you’ll be approved for credit (and at what interest rate). Since it’s possible that there are errors on your credit reports, you could have lower credit scores than you deserve — potentially leading to missed credit opportunities.
All you have to do to make sure this doesn’t happen to you is review your credit reports at least once per year and then promptly dispute any errors you see. This is a service that all CRAs must offer for free. (Other free services they offer are the ability to place a fraud alert on your credit report or to freeze your credit report — both things you might want to do if you fear you’ve been exposed to identity theft.)
Once you know your credit reports are safe and accurate, you can be sure that your credit is ready for whatever’s on your financial wishlist.
Get all the facts about credit scores and credit reports.
[Find credit report errors using Upturn Credit’s FREE tool.]