Equifax, Experian, and TransUnion: The Three Major Credit Bureaus
There are three major credit bureaus: Equifax, Experian, and TransUnion. These different bureaus receive information about your credit history and compile your credit history. Your creditors may report to different lenders, and your creditors may check reports from different bureaus. Furthermore, while these are the largest credit bureaus, they are by no means the only credit bureaus.
These credit bureaus take your credit report and calculate your credit score. While lenders report to these bureaus, you can also engage with them in a few ways. First, you can get your credit report and score from them. Next, you can actually freeze your credit with the credit bureaus. Freezing your credit score is a fraud-prevention measure that prevents credit bureaus from sharing your information with other organizations. This makes it more difficult for scammers to access your credit report and apply for credit in your name if some of your personal information has been compromised. That said, if you are applying for credit, you will need to unfreeze your credit so your lender can access it as well.
Why is there more than one credit bureau?
There are multiple credit bureaus to ensure competition and prevent a monopoly. While it may seem frustrating that your data is kept at so many different places, it is actually a good thing that there isn't just one organization that is the steward of your credit. This ensures each of these organizations continues to improve their reporting models and provide borrowers with honest reporting.
Understanding FICO Scores and VantageScores
Along with the three credit bureaus, you've probably also heard of FICO scores. Frequently, the terms FICO score and credit score are used interchangeably. Your FICO score is a three-digit number that can range from 300 to 850. In its essence, FICO, short for Fair, Isaacs, and Co, is another credit reporting agency. FICO is just one of the most popular scoring models used by lenders, which use their own proprietary scoring models that they do not share to produce scores. You can see your FICO score as a soft inquiry by visiting myfico.com.
The VantageScore, jointly developed by the three major credit bureaus, is becoming increasingly popular. VantageScore is FICO's biggest competitor and, like FICO, uses date from multiple bureaus to calculate your score, which also ranges from 300 to 850.
Your score may vary between these two agencies because their scoring models differ. Furthermore, they may not pull all the data from all three bureaus to pull their scores.
Read: How to Build and Improve Your Credit Score
How Lenders Use These Agencies
Different lenders will pull scores from different agencies for different purposes. Mortgage lenders will pull more rigorous reports, most likely from all three agencies, to see your full credit history due to the intensive nature of a mortgage loan. Meanwhile, smaller loans, such as personal and auto loans, may be sourced from a single agency.
As a whole, this information can be a lot to take in, but the most important thing to remember is that your credit score is based on your information. Luckily, there are now many great ways to keep track of your credit score so you won't be caught off guard next time you apply for a loan. This includes services like Credit Score, which provides you with your VantageScore through TransUnion.
This is for educational purposes only and not financial advice.
