How Credit Reporting Agencies Work

[Michael Stuart Kelly]

How Credit Reporting Agencies Work

by Dave Roos

How Stuff Works

This is handy information that many people simply don't have on hand. I am not a big fan of the society of debt that currently exists in the USA, but it makes sense to understand some of the inner workings. From the article.

Experian, TransUnion and Equifax -- also known as the "Big Three" -- are not the only credit reporting agencies in the United States; they're just the biggest. According to the Consumer Data Industry Association, an international trade organization that represents credit reporting agencies, there are dozens of smaller, regional and industry-specific credit bureaus that provide clients with credit reports and other "risk-management" services [source: CDI Online]. There are also many international credit reporting agencies that focus on one country or region.

. . .

It's important to remember that the Big Three credit reporting agencies are independent companies that each collect information in different ways. Therefore, a credit report from Experian will contain slightly different information than a credit report from TransUnion, which will differ slightly from Equifax. Not every creditor and lending institution reports to all three credit bureaus, leading to further discrepancies.

For more information on how credit reporting agencies compile credit reports and calculate credit scores, see How Credit Reports Work and How Credit Scores Work.

I find this stuff boring, but absolutely essential to read. I put the last paragraph in because of the links to further information on credit scores. How Stuff Works is a great little site for correct practical overviews.

Michael

[Michael Stuart Kelly]

Here is a wonderful set of links for finding out your credit score without getting trapped into paying for a subscription you don't need.

How to Find One's Credit Report and Credit Score Inexpensively and Safely

by Trent Hamm

The Simple Dollar

The problem is that there's no obviously clear way to acquire this information. Credit reports are managed by three credit bureaus (Equifax, Experian, and TransUnion), and these companies make money by selling your credit report and your credit score to lenders. They also hope to make money by selling this information to you, too. Even worse, there are sharks in the water out there. Programs like freecreditreport.com seek to trick you into signing up for subscriptions to stuff you likely will never use in exchange for your credit report.

. . .

You can get your credit report for free, no questions asked, at annualcreditreport.com. This is a service offered by the FTC that allows you one free download of your credit report each year from each agency (Equifax, Experian, and TransUnion). Since most of the time the three reports are the same, you can effectively grab your credit report for free every four months. Do not use other services to get your report - you'll end up being forced to sign up for services and pay fees that you don't have to pay. The worst offender here is the heavily advertised freecreditreport.com.

. . .

The cheapest option is to not find out your specific score. If you've checked your credit reports at annualcreditreport.com, you know what your credit report looks like. You can use that information, along with knowledge of your personal finances, and use a FICO score estimator to get a pretty strong estimate of your credit score. I tried this tool and found that it predicted a small range of potential scores - my real score was in fact within that range.

There's lots more in the article.

Michael