What is a Credit Bureau?

Credit Bureaus, also known credit rating agencies (CRAs), refer to agencies that collect, organize, and disseminate credit information on individuals and to potential and existing creditors.

What does a Credit Bureau Do?

In the United States, there are three major personal credit agencies: Equifax, Experian, and TransUnion. Creditors and lenders use these major CRAs to check borrowers credit. The three agencies retail information of over 200 million Americans. CRAs are regulated by the Fair Credit Reporting Act (FCRA) which controls how the bureaus must operate. The Federal Trade Commission in coordination with the Office of the Comptroller of the Currency (OCC) monitors CRAs because they handle critical information on millions of citizens.

The Role of Credit Reporting Agencies

CRAs receive credit-related information from lenders and companies with which customers do businesses with. Lenders report whether their customers are paying their bills on time or not regularly. If an individual has ever been 30 or more days or has defaulted entirely, such information is presented to the CRA. Also, the lenders report the amount that one owes them. Credit bureaus also have access to relevant public records including tax liens and bankruptcy information from local to state courts. Such information is included in the consumers credit report. CRAs sell consumer credit information to third parties, particularly businesses, but only with legally valid reason. For instance, in case a company with whom a consumer has applied for credit would want to take a look at the credit history. Consumers information could also be sold to companies that intend to prescreen the consumer for a particular product or service. Employers and landlords can only access a consumers credit report with the written consent of the consumer.

What Credit Bureaus Don't Do

The only focus of credit bureaus is to provide information and analytical tools to businesses which then use the information to decide on whether a consumer should be given credit and what sort of interest they should be charged. However, the bureaus do not make any decisions.

The Big Three CRAs

1) Equifax - Equifax was founded in 1899, but its reputation was tainted in 2017 when it suffered from data breach after it was hacked which resulted in the divulgence of critical personal information of over 43 million consumers. Since then, Equifax made a tool on its website where individuals can check whether they were affected. The company also attempted to make amends by offering free credit monitoring series among consumers that had their information breached. The company currently protects against credit fraud and identifies theft protection among its consumers. It also offers FICO and VantageScore credit scores that consumer need at a chargeable fee. 

2) Experian - Experian was founded in London when businessmen began sharing information on their customers who failed to pay bills, and in 1827, the businessmen formed a group, the Manchester Guardian Society which later became Experian. The company uses FICO 8 credit score calculation system as well as offer Credit Tracker which is available through subscription. 

3) TransUnion - TransUnion began as a holding company for a tank car corporation, and later it branched to become an agency for credit reporting. If you think that you are an identity theft victim or you might be, you can freeze your credit report, and TransUnion will take the necessary steps to notify the other CRAs that you have done so. Consumers can also purchase a credit monitoring subscription with TransUnion.

Credit Reporting Agencies are Separate Entities

Although credit bureaus are separate entities, they have business relationships with the same banks, credit card issuers, and other lenders that their consumers might have accounts with. A consumers account history will appear on all the credit reports from these agencies because of their connections, but credit agencies never share their consumers account information with each other. This rule, however, is an exception in the case of fraud alerts and credit freezes. Creditors might report to all the three major CRAs or just one or 2 of them. This means that information contained in the consumer files of the agencies may be different. When lenders and potential creditors check consumers credit, they might pull a credit report from one agency rather than all the three. It is always cheaper for business to check just one credit report.

Some Agencies do Special Reporting

Some CRAs major in particular types of reporting. As such, certain lenders or companies are more likely to purchase such reports from them than others. For instance, some specialize in handling rental histories of landlords while others focus on screening potential employees. MicroBilt/PRBC offers their services predominantly to subprime lenders that are willing to extend their loan offerings to low-income individuals as well as those with poor credit. Innovis also provides data which help consumers confirm their identity for reasons of fraud detection and prevention. Financial institutions such as banks have their own reporting agencies including ChexSystems and TeleCheck that focus on bank account activities. Other agencies are unique to insurance or medical industries. The specialized agencies might not have access to all consumer information concerning credit history, but only obtain data that is pertinent to a particular scope.

Consumers are entitled to see their reports

Every consumer has a right to view their credit reports as well as receive a free report from each of the major reporting agencies at least once a year through AnnualCreditReport.com. Consumers can also get a copy of credit report without any charge if they have been turned down for credit, but the request must be made within the 60 days of being declined. Also, consumers can make additional credit reports purchase directly from any of the CRAs in case they want to check their credit progress more than once a year. Even though Equifax and Experian are separate entities, they offer credit report that includes information for three major reporting agencies in one document. Individuals must purchase their credit score separately from their credit reports. The scores are derived from information in the credit report.

Disputing Information in a Credit Report

Individuals have the right under the Fair Credit Reporting Act to dispute information on the credit report. The CRA has a specific period of time to either substantiate the information on the report or remove it.

Fraud Alerts and Security Freezes

Consumers can also reach out to any of the CRAs to place a credit freeze or fraud alert on their credit report in case they have a reason to believe they are victims of identity theft. When one applies for a credit freeze, they will be blocking access to their report, so they would not be able to apply for credit since the lender wont be able to access the report for reviewing. Credit freezing is always free, and the freezing can be lifted at any time. Placing fraud alert works in the same manner as credit freezing, but alert only remains effective for 90 days. An alert is also free, but a consumer may pay for credit freezing in some states. In case a consumer suspects that there is a problem, it is important to freeze account with all the three major CRAs.

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