The Three Credit Bureaus

There are three major credit bureaus active today. These are Equifax, Experian, and TransUnion, and they're more important than you might think. What a credit bureau does, primarily, is collect information on how consumers around the country use credit. They gather the credit information of individual consumers and issue reports on it, such as a person's Credit Report, which is used by creditors like credit card companies, lenders, insurance companies, landlords, and so forth to decide whether or not to extend credit to somebody.

This process has been streamlined to work quickly and efficiently in most cases. When somebody applies for a loan, credit, or the like, the potential creditor sends an inquiry to one of the three big credit bureaus, or possibly to all three, to request a copy of that person's credit history. The creditor will then be able to use that information to make a decision about whether or not the applicant is a safe bet to extend credit to.

The problem with this process is that Equifax, Experian, and Transunion all collect information different and report it according to a different formula. A single person's credit reports and all-important credit score may be different depending on which agency reports it. Some creditors will request reports from all three, but some will not. Therefor, it behooves the consumer to know their own credit score from all three major credit bureaus, so that a consumer will know if their score is significantly lower on one report than the other two, and could potentially give them time to investigate and correct any errors that one bureau might have made BEFORE their application is denied on those grounds.

Another, less often used service that the credit bureaus can provide is help with identity theft. If someone believes that their information may have fallen into the wrong hands and fears that it may be used fraudulently, they can call one of the major credit bureaus and have them place a fraud alert on their credit file, which, among other things, automatically opts the consumer out "pre-approved" credit and insurance offers for two years, making it much more difficult for somebody to use the consumer's information against them. It will also let any creditors who request that consumer's credit information know about the fraud alert, which will notify them to be more careful in verifying the consumer's identity before extending credit to somebody using the consumer's information.