Understanding the “Big Three” Credit Bureaus

3 Big Credit Agencies

The “Big Three” credit bureaus are Experian, TransUnion, and Equifax. While there are many credit bureaus and credit reporting agencies, these three are the biggest ones. The other bureaus are small regional, industry-specific, and some international bureaus. The “Big Three” maintain the largest national databases of financial data. They process billions of pieces of data and produce millions of credit reports and scores.

Credit bureaus are also referred to as credit reporting agencies (CRA), although credit rating agencies are more for companies and corporations. The credit bureaus are private, independent companies. They collect financial data differently and distribute credit reports uniquely. While their process is similar, each bureau sometimes produces a different result. Knowing more about how these big three credit bureaus work will help you build financial strength.

What do these bureaus do?

The “Big Three” primarily do two things:

1) They collect financial data

2) They produce credit reports

Here’s how they collect data

Creditors report information to the bureaus.

Creditors and lenders continuously send updated credit information to one or more of the credit bureaus. This information includes how much you owe, whether you pay on time, if you open new credit lines, and other financial activity.

Credit Bureaus collect information regularly.

When you apply for a loan or credit card, your personal information on the application goes to the bureaus. Credit bureaus scan public records for financial information, including student and housing loans, court documentation for tax liens, bankruptcies, and foreclosures. Lastly, sometimes they purchase other information from the other credit bureaus.

Credit bureaus only share credit reports and scores when there’s a request to do so. This is called an “inquiry”.


Here’s how they provide credit reports:

A soft inquiry

while soft inquiries are made by you, the consumer, or by an employer.

A hard inquiry

Are requests made by financial institutions like credit card companies, mortgage companies, etc.

The Birth of Credit Bureaus

Back in the 1800s when merchants got requests by customers to extend a line of credit, they had no way of making a determination whether or not to take that risk. The merchants began to make lists of people who were credit risks and share them with the other merchants. As the population grew, so did the number of merchants and businesses and the need for credit. From that grew a number of credit reporting businesses, including Equifax (founded in 1899), TransUnion (founded in 1968), and Experian (founded in England in 1980).

Since then, the government regulates how credit bureaus work and which information they can collect. In 1971, the U.S. Congress enacted the Fair Credit Reporting Act (FCRA), the first legislation protecting the rights of consumers. Because of this, credit bureaus have limits on how they attain data, and to whom they disclose information.


Do I Need to Know All Three of my Credit Scores?

Many times, lenders will use just one credit report and score from a single credit bureau to make the judgment on extending you credit. However, if it is a mortgage you need, most likely the lender will examine all three reports. A mortgage is such a large credit amount of money that its a much more thorough consideration. If you are shopping for a mortgage, or are considering refinancing, knowing all three of your credit scores is a good idea.

Get your free credit report

Remember that the formulas that make up your scores are always changing in an effort to improve accuracy. It is likely your credit score will change over time by a particular credit bureau, even if your credit history is constant. This is because the method by which they derive your score has been altered. Under the Fair and Accurate Credit Transactions Act, you have the right to receive a free copy of your report from each credit reporting agency once a year.

Another consideration is that your credit score may vary greatly amongst the three bureaus. Because creditors and lenders may report information to one but not all bureaus, the financial data each bureau may differ. Also if a consumer disputes information on one bureau but not another, the data the bureaus have is different and will result in a different score. These variations in data may translate into big differences in scores. For this reason, it is wise for you to make sure you know what financial information is on each of the three credit reports and to know all three of your credit scores. Generally speaking, your scores should all be relatively close, even if they are not the same.