We know it is hard to figure out your credit score and what the three major credit bureaus really do. Especially since there are even more scores besides just the main bureaus. The main 3 also have different tier bureaus that consist of what bank pull, commercial business pull, and what consumers see through the likes of Credit Karma and other free hubs. However, it is important you understand how these reporting agencies collect information since it is what banks, landlords and other groups use to determine whether or not they will loan you money or rent you an apartment. Thankfully, we can demystify Experian, Equifax, and TransUnion, the three major credit bureaus.
The Basics of Equifax, Experian, and TransUnion
The Fair Credit Reporting Act says that customers are allowed to see their credit reports and to argue any outdated or false content. Equifax is based in Atlanta, with over 10,000 employees around the world. TransUnion was created in 1968 and has over 200 million files on consumers in the United States. Lastly, the largest of the bureaus is Experian, also founded in 1968. It is important to know that you should always review the information of all three bureaus to make sure you have a complete picture of your credit history and score.
These groups collect information from public records and from any loan, credit card, and lease application you fill out. They have information on open credit cards, last known residences, and more. They will know if you have lost a court judgment or have filed for bankruptcy. Most lenders around the world report to the three major credit bureaus because it helps them make future lending decisions. Additionally, they track open lines of credit, timely versus late payments, and closed accounts. You may not even realize that your first credit card line is on there.
How to See Your Credit Report
There are a number of ways that you can access your credit report. You are allowed to ask for a copy from each of the bureaus once every 12 months. A quick way to do this is to go on AnnualCreditReport.com. There are also websites like NerdWallet that show some of your information. Different bureaus collect information from different places, so you should be on top of all three reports every year. Even removing one item from the history could really improve a score and help you get better interest rates and terms on funding or purchases.
Handling Credit Report Mistakes
As soon as you spot an error, take the time to dispute it. Consumers need to file formal complaints with the agency by writing in about what the mistake is. If you have any documentation to prove the mistake, this is important to include. Removing one item could pump up your score and really help you out. If you are the victim of a crime or fraud, all you have to do is contact one of the bureaus and they will let the others know. The contact information for the credit bureaus is listed online. Credit Karma also allows you to dispute an account with the push of a button.
Is a Report the Same Thing as a Credit Score?
Laws say that credit bureaus need to give you your history but they are under no requirement to give consumers their credit score. You will soon see that there are many credit scores out there, but the two major ones are FICO and VantageScore. There are various formulas used to determine this. Also it takes approximately 30 days for a credit bureau to update any information you may have accumulated. In other words, when you make your car payment, mortgage payment, credit card payment, or any other financial payment, the scores do not update overnight. It takes approximately a month or so before they update.
Knowledge is power in the credit world. By requesting each of your three reports every 12 months, you know whether or not your history is correct. After seven years, some items may be removed. It is important to keep track of these dates too and to make on-time payments. All of this is reflected in your credit report. Experian, Equifax, and TransUnion are constantly pulling information about individuals spending. Regular updates ensures you are fiscally responsible and able to really rebuild your credit. There are also companies like Life-Lock which help to monitor your credit as well.
Inquiries can also help to contribute to your score, or lack of them. Everytime someone pulls your credit report, an inquiry shows up. This informs the prospective lender or creditor of your attempts to apply for credit. An inquiry only burns about 2 points on your score, so not much. However, when you have been shopping around for a month or so and allowing every lender to pull your credit report, 10-20 inquiry’s @ 2 points a piece really starts to drag your score down. It also shows potential creditors that everyone is pulling your credit report and no one is lending your money. Then they ask themselves “Why isn’t anyone else approving his/her application for funding?” This also does not look good on your report. In a perfect world, you would have high limits, low balances, and only a couple inquiries on your report. This is what a steller credit report looks like. Nice and easy wins the credit race. One day and one payment at a time.