What is a credit bureau and what is its purpose?

What is a credit bureau? 

A credit bureau is a company that collects and compiles your financial and credit history from lenders, creditors, and public records. It provides detailed credit reports and scores that lenders use to assess your creditworthiness for a loan or credit card. You can also use the information these bureaus collect to understand your financial standing and take steps to improve it to qualify for better loan terms and interest rates. In the US, the three major bureaus include TransUnion, Experian, and Equifax.

Credit bureaus operate by selling these credit reports and scores to lenders, employers, insurers, and other businesses that need to assess financial risk. However, they don’t make lending decisions — approval or denial of your application lies completely with the lender or creditor. 

Sometimes the terms “credit bureau,” “credit reporting company,” and “consumer reporting agency” are used interchangeably, and for practical purposes, they refer to the same organizations. However, “consumer reporting agency” is the broader legal term used in federal law, which includes any company that reports on consumers — not just credit information, but also data like rental history or employment information. When people say “credit bureau,” they’re usually referring to one of the three companies (Experian, Equifax, and TransUnion) that focus specifically on credit information.

What is the purpose of a credit bureau?

Credit bureaus make credit information easily accessible to lenders and consumers. Before consumer reporting agencies (aka credit bureaus) existed, lenders had to call each reference on your loan application and check your payment history with previous creditors, which was a slow and expensive process.

Credit reporting companies solve this problem by providing banks, employers, and insurers with instant access to your credit history. This helps these organizations assess financial risk and make lending decisions quickly. Lenders can price loans more accurately because they have reliable information about your borrowing behavior.

For you as a consumer, credit bureaus help you build a credit history that opens the door to getting loans, credit cards, and other financial services you may need. You can track your credit score and how it changes in relation to your credit activity through credit monitoring services. If needed, you can use these insights to start making better financial decisions to keep a good credit score.

Credit bureaus also support fraud prevention and identity theft protection by tracking unusual activity in your credit profile. This makes lending more efficient, reduces default risks for creditors, and expands credit opportunities for consumers.

How do credit bureaus work?

Credit bureaus operate through a network of companies called data furnishers that voluntarily report your financial information to them. These data furnishers are the financial institutions you interact with regularly — banks, credit unions, credit card companies, mortgage lenders, loan servicers, and collection agencies.

How do credit bureaus get information?

Data furnishers send updates about your accounts to credit bureaus, typically once a month. This information includes when you opened each account, your current balance, credit limits, and whether you pay your bills on time.

Companies also report details from your credit applications, which is why your credit report contains your current and past names, addresses, phone numbers, and employers.

Credit bureaus also gather information from public records, particularly bankruptcy filings.

What information do credit bureaus collect?

Credit bureaus collect and subsequently provide several types of information in your credit report:

• Personal information (full name, home address, phone number, Social Security number, date of birth, and employment history).
• Credit account history and current account balances.
• Payment history, including any late payments or delinquent accounts.
• Credit inquiries made when you apply for new credit.
• Public records like bankruptcies.
• Collections account history.

How is credit bureau information accessed?

Your credit report isn’t publicly available. Only organizations with legitimate business reasons can access it, including lenders, banks, employers, and insurers who need to evaluate your creditworthiness and determine whether you qualify for their services based on your financial history.

Some organizations, like employers and landlords, must obtain your written consent before accessing your credit report. Others, like lenders you’re applying to for credit, can access your report as part of their legitimate business purpose when you submit an application. For example, when you apply for a credit card at a bank, the bank can pull your credit report from one or more credit bureaus to evaluate your application.

As a consumer, you’re entitled to request all information that credit bureaus maintain about you. You can get your free credit report once a year at AnnualCreditReport.com or you can use credit monitoring or identity theft protection services to keep track of your credit activity and get security alerts.

Who uses credit bureaus? 

Many organizations rely on credit reporting agencies to assess financial risk when providing services. The primary credit bureau users include:

• Lenders and creditors. Banks, credit card companies, mortgage lenders, and auto loan providers use credit reports to evaluate loan applications, determine interest rates, and set credit limits.
• Landlords. Property owners and rental companies check your credit report when you apply for an apartment or house rental to assess whether you’re likely to pay rent on time.
• Employers. Some employers, particularly in the financial sector or for positions that  require security clearance, may review your credit report as part of the hiring process.
• Insurance companies. Insurers use credit information for underwriting decisions and to determine premiums for auto, home, and life insurance policies.
• Utility and telecom companies. Electric, gas, water, and phone service providers may check your credit when you apply for new services to decide whether to require a security deposit.
• Government agencies and debt collectors. Federal and state agencies may access your credit information for benefits verification, licensing, or security clearances, while debt collectors use it to manage collection activities.
• Consumers. Credit reporting companies also serve you directly — they allow you to check your credit reports for accuracy and identify areas for improvement to boost your credit health.

What are the three main credit bureaus?

The three main credit bureaus operating in the United States are Experian, Equifax, and TransUnion. These companies are known as the “Big Three.” They dominate the American credit reporting industry and maintain credit information for nearly all consumers in the country.

While these three credit bureaus have expanded globally, other countries often rely on local or regional bureaus that operate instead of or alongside Experian, Equifax, and TransUnion.

Equifax

Equifax is one of the oldest credit bureaus in the United States. The company was originally founded in Atlanta, Georgia, as the Retail Credit Company in 1899, and became the first modern credit bureau that collects consumer payment data from merchants. In 1975, the company changed its name to Equifax. It has gradually expanded into global markets over the years and now offers credit-related services in Asia Pacific, Canada, Europe, and Latin America.

Experian

Experian’s history dates back to 1826, when a group of merchants in London started sharing information about customers who failed to settle their debts. However, the Experian name and the company’s presence in the US are the result of a series of mergers and acquisitions that happened in the mid-1990s. Today, Experian is a global leader in the credit space, with information on over 1.5 billion consumers and 201 million businesses.

TransUnion

TransUnion was founded in 1968 as the parent holding company for a railcar leasing operation. It entered the credit reporting business by acquiring the Credit Bureau of Cook County the next year. TransUnion continued building its business and it’s now one of the largest credit bureaus in the US and Canada. It also has global credit reporting operations in the UK, India, and parts of Africa, Asia Pacific, and Latin America. 

Other credit reporting companies

Beyond the three major bureaus, numerous specialty consumer reporting agencies focus on specific market areas that either complement or go deeper than what the main bureaus offer. 

The Consumer Financial Protection Bureau maintains an updated list of these companies, which includes:

• Rental and eviction history specialists. For example, RentPrep provides rental tenant screening, which includes detailed credit checks, background checks, eviction records, and rental history reports for landlords.
• Insurance claims history databases. One major example is LexisNexis C.L.U.E. (Comprehensive Loss Underwriting Exchange), which maintains databases of auto and property insurance claims history. C.L.U.E. can provide up to seven years of personal insurance claims data.
• Employment and income verification services. Companies like Truework automate income and employment verification for lenders, landlords, and background check companies, while Cisive specializes in employee background screening including criminal checks, employment verification, and drug testing for employers.

These specialty companies fill gaps for specific market needs that the three major credit bureaus don’t cover.

Who regulates credit bureaus?

In the US, credit bureaus are primarily regulated under the Fair Credit Reporting Act (FCRA), a federal law that was enacted in 1970. The main purpose of the FCRA is to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. 

The two federal agencies that oversee credit bureau compliance with the FCRA are the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC):

1. The CFPB is the principal federal regulator that administers, interprets, and enforces federal consumer financial laws, including the FCRA. The bureau focuses on enforcing consumer financial laws and protecting consumers in the financial marketplace.
2. The FTC’s purpose is to protect consumers and promote fair competition in the US economy. As part of its agenda, FTC also monitors consumer reporting agencies to make sure they are handling your credit information accurately and fairly.

Major provisions of the FCRA

The FCRA provides several important protections for consumers:

• Access to your information. You’re entitled to get your own credit report for free once a year from each major bureau. Plus, they must notify you if your credit information is used to deny you credit, employment, or insurance. 
• Right to dispute errors. You can dispute inaccurate information in your credit report, and bureaus must investigate and correct errors within 30 days.
• Time limits on negative information. Credit bureaus can’t report most negative information that’s more than seven years old, or bankruptcies that are more than 10 years old.
• Access control. Only businesses with valid reasons can access your credit report, while employers need your written consent.
• Opt-out rights. You can limit prescreened credit and insurance offers.
• Fraud protection. You can place fraud alerts on your credit file at no cost — either a 1-year initial alert or a 7-year extended alert for identity theft victims. These fraud alerts will require extra verification before new accounts are opened. You can also place security freezes on your credit reports to block unwanted or illegitimate access.
• Legal rights. You can sue in state or federal court if credit bureaus, data furnishers, or report users violate your FCRA rights.

For detailed information, you can read The Summary of Your Rights Under the Fair Credit Reporting Act.

How to monitor and manage your credit score across credit bureaus

Monitoring and managing the scores requires some effort on your part, but the effort pays off in the long run.

How to monitor your credit score

You can monitor your credit score for free or get a paid service to do it for you. First, let’s look into what you can get for free.

You can request free weekly credit reports from all three bureaus at AnnualCreditReport.com. To access the reports, you’ll have to fill out a form on the website, which involves answering some questions or presenting some records to verify your identity. You’ll have to repeat this process each time you want to access one or more of your reports.

Similarly, you can go to each bureau separately for your credit information:

• Experian gives you free FICO Score 8 updates at least once a month, but you’ll have to request them on their website.
• Equifax provides free monthly credit scores and credit reports — also upon request.
• TransUnion offers daily access to your credit report and scores if you subscribe to their service.

But before you go through all that trouble, check what you already have. Many banks and credit card companies now include free credit scores with your account login. You might already have useful tools sitting right in your banking app.

If you don’t have the time to check your credit score by submitting requests to the credit bureaus, you should consider upgrading to paid services that will do the credit monitoring for you. Premium services like NordProtect provide VantageScore 3.0® credit scores from all three bureaus and a detailed credit report once a year.

As one of the best credit monitoring services for people who value their identity protection, NordProtect goes further than simply providing your credit score and report — it monitors your credit activity and immediately sends security alerts and notifications if a creditor requests to view your credit file, someone applies for a loan your name, or an account is opened using your personal details. Any new or suspicious activity triggers an alert so that you can secure your accounts before it’s too late.

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How to manage your credit score

Managing your credit score requires developing good financial habits, but it’s easier than you may think. Do the following and your credit score is bound to remain high:

• Pay everything on time. Your payment history is the biggest factor in your credit score. Set up automatic payments or calendar reminders — whatever it takes to never miss a due date for a mortgage payment or utilities. 
• Keep your credit utilization low. Use less than 30% of your available credit limits, but under 10% is even better. If your card has a $1,000 limit, try to keep your balance under $100.
• Be strategic about new credit. Only apply for credit when you really need it. Multiple applications in a short time can hurt your score, but there’s an exception — if you’re comparing offers from multiple lenders for the same type of loan (like a mortgage or car loan), do the comparing within a 14-45 day window and all those applications will typically count as just one inquiry on your credit score.
• Use a credit monitoring service. Stay on top of your credit with alerts from a reputable service like NordProtect. When your credit score drops unexpectedly — from identity theft, reporting errors, or missed payments you weren’t aware of — you could suddenly face higher interest rates on loans and insurance premiums. Credit monitoring helps you catch these problems early, instead of discovering them when you’re already being charged more or getting denied for the credit you need.
• Fight errors immediately. If there’s a mistake on your credit report, dispute it right away with the relevant bureau. Errors can stick around for years if you don’t challenge them, dragging down your score unnecessarily.