A credit bureau - sometimes called a "consumer reporting agency" - is a business that collects relevant consumer information from creditors and courthouses, and then sells that information to interested parties such as potential lenders. Such information is sold in the form of a credit report. In the U.S., the three major credit bureaus are TransUnion, Experian, and Equifax.
Information found within credit reports are often distilled into a "credit score," and it is now this score that most often determines whether a consumer will acquire a loan. Before credit scores became widely used, potential lenders interviewed consumers directly in order to gauge their creditworthiness. This method was time consuming, sometimes unreliable, and often prejudicial. Eventually, lenders began utilizing the scored credit reports in order to assist them in making more impartial lending decisions.
However, credit bureaus have been around for much longer than credit scores which only became prevalent during the 1960s:
TransUnion: Founded early in the 20th century in Chicago, IL by a railway car manufacturing company as northern Illinois's local credit bureau, TransUnion is now owned by private equity firms, Advent International and Goldman Sachs Capital Partners. The credit bureau operates 250 offices in 25 countries.
Experian: In 1970, a company called TRW created a credit bureau that within a few years had become the industry's largest player in the United States. Later merging with competing credit bureau, Chilton, it was purchased in 1980 by GUS plc, a retail group in Great Britain, and was soon renamed Experian. The company is still the largest credit bureau in the world, employing more than 17,000 people in 41 countries.
Equifax: As the oldest credit bureau in the United States, Equifax was founded in Atlanta, GA in 1899. Originally named Retail Credit Company, Equifax's business grew quickly, spanning across the U.S. and parts of Canada by the 1920's. Currently, the company employs over 7,000 people in 14 countries.
Information. The credit bureaus produce their own credit reports for every adult consumer using the same types of information, including:
Personal - Your full name, Social Security Number (SSN), address, birthday, current and past employersPublic - Information of public record such as tax liens, bankruptcies, judgments, etc.Credit and account information-A list of current and previous accounts, creditors, account activation dates, credit limits, payment history, and monthly amounts.Inquiries - A list of people and/or businesses who have requested access to your credit report.
Mistakes. No one is perfect, not even the credit bureaus. The Big Three are sometimes guilty of reporting inaccurate and false information on consumer credit reports. More often that not, the real culprit are the information providers - mostly creditors and courthouses - who must meet three tough standards for fairness, accuracy, and substantiation before reporting information about you to the bureaus.
Governing laws. Contrary to popular belief, the credit bureaus are not government agencies. In fact, as highly regulated companies, the bureaus are all subject to regulation by the Federal Trade Commission (FTC) and applicable consumer protection statutes. Consequently, you have the right to view and challenge the information found on each of your credit reports, regardless of who supplies them.
Information. Yes, information is regarded as a credit bureau similarity and difference. Why? Creditors often develop relationships with a specific bureau, choosing to report information to them exclusively. The result? An account that appears on your TransUnion report, for example, may be missing from your Experian report.
Credit scoring systems. Each credit bureau licenses slightly different credit scoring algorithms from the FICO Corporation. Those are the scores that are almost always shown to potential lenders. Complicating matters, however, each of the bureaus also produces a non-licensed (i.e., "less expensive") internal score that they often provide to consumers. If you've ever been frustrated by scoring differences across the three credit bureaus, the culprit could be a simple difference in mathematics.
The credit bureaus are filled with commonalities and conflicts, making it difficult to decipher how to improve your credit score across all three.