When you apply for credit, the lender typically reviews your credit history from one of the credit bureaus. This process might sound mysterious if you're unsure whatthe credit bureaus are and what purpose they serve, but the concept is quite simple.
A credit bureau is simply an agency that gathers information about your credit usage and history, then presents it to a lender when you apply for credit. Each credit bureau differs in how they extract and compile your information, so it's important to understand how they work.
There are three main credit bureaus: Experian, Equifax and TransUnion. Below, CNBC Select reviews common questions about the credit bureaus so you can be more informed when applying for a new card.
What does a credit bureau do?
A credit bureau is a credit reporting agency that aggregates information about your credit history into a credit report. This typically includes payment history, number of credit accounts and length of credit history.
Information in your credit report is shared with financial institutions and other parties, such as real estate and auto companies, when you apply for credit cards, mortgages and auto loans. Credit bureaus do not make lending decisions; they only collect and provide information to lenders.Lenders use this information to determine your eligibility for credit.
Why does your credit score differ between credit bureaus?
If you've ever checked your credit score from various sites, you may notice that it is rarely the same — but that's normal. Your credit score can differ for a few reasons.
First, each credit bureau has different information on your credit report, depending on how frequently they update your information and how far back they extend their inquiry into your credit habits. In addition, there are hundreds of different credit scoring models, such as FICO Score 8 or VantageScore 3.0. Each credit scoring model calculates risk differently, which results in score variations depending on which model the credit bureau uses to calculate your score.
For example, when you check your free credit score with *Experian Boost™, they provide your credit score based on the widely-used FICO® Score 8 model. However, free Equifax scores use their own proprietary model, the Equifax Credit Score.
Last, not all lenders rely on the same bureau. If you were to apply for the Chase Sapphire Preferred® Card, the credit report pulled could potentially be different than if you were to apply for the Citi Double Cash® Card (see rates and fees.). That's because Chase may not use the same bureau and model as Citi does to determine your creditworthiness. And if you and a friend both applied for the same card, the credit bureau used to check your credit can also differ.
Before you apply for credit, we recommend checking your credit score from all three bureaus to see where you stand holistically. And if possible, ask the lender which credit bureau they deal with so you can be sure to check to see which score you're being evaluated on.
How to get a free credit report and credit score
Under the Fair Credit Reporting Act, you're entitled to one free credit report every year from each of the main credit bureaus — Experian, Equifax and TransUnion. You can access these reports for free at annualcreditreport.com, which is authorized by federal law.
Other resources, such as Experian, may provide an updated credit report every month. Note that your Experian credit report is free, but you'll have to upgrade to a paid plan to access your TransUnion and Equifax reports.
You can also check your credit score for free on a monthly basis with many online resources, such as Experian Boost™, CreditWise from Capital One and Discover Credit Scorecard.
How to dispute credit report errors with bureaus
If you notice incorrect information on your credit report, it's in your best interest to dispute it right away. One in four Americans have an error on their credit report, according to a 2012 studyby the Federal Trade Commission.
Credit report errors can lower your credit score and negatively impact credit approval. The sooner you take action, the quicker the issue can be resolved.
If you notice an error on your Experian credit report, check if it's also present on your TransUnion and Equifax reports. Then dispute the error directly with the credit bureau(s). Legally, the credit bureau has to report the issue to the other two bureaus. Regardless, you should dispute it directly with each credit bureau to cover all the bases.
The simplest way to dispute a credit report error is online with Experian, Equifax or TransUnion (click on each bureau for the online dispute link).
Read more details on how to dispute a credit report error.
*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
Equifax, Experian and TransUnion are the three nationwide credit bureaus. According to the Consumer Financial Protection Bureau (CFPB), credit bureaus are companies that compile and sell credit reports.
What does it mean to be under credit bureau? ›
If you are unable to pay off debts, your name will be flagged by the credit bureau, and added to a blacklist; and it will be more difficult for you to get loans in the future. The simplest way to clear your name from the credit bureau is to pay off the debt.
What does a credit bureau check do? ›
Financial institutions look at your credit report and credit score to decide if they will lend you money. They also use them to determine how much interest they will charge you to borrow money. If you have no credit history or a poor credit history, it could be harder for you to get a credit card, loan or mortgage.
Do all 3 credit bureaus matter? ›
One credit bureau isn't more accurate than another, rather, they may simply have different methods of calculating your credit score. It's important to note that all three bureaus are used widely in the U.S. None of them are more “important” than the others.
Which credit bureau is the toughest? ›
Of the three main credit bureaus (Equifax, Experian, and TransUnion), none is considered better than the others. A lender may rely on a report from one bureau or all three bureaus to make its decisions about approving a loan.
Is it true that after 7 years your credit is clear? ›
Highlights: Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.
Can I check if I am blacklisted? ›
To check if you are blacklisted, you can receive an annual complimentary credit report. This can be obtained from any of the prominent credit bureaus in South Africa. The report provides information on your credit score and allows you to review for any potential inaccuracies.
Which credit bureau is more important? ›
It's important to know that while each credit agency, or bureau, creates its own proprietary report, no single agency is more important than another. You may already be familiar with the three big consumer credit bureaus — Equifax, Experian and TransUnion.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
What will fail a credit check? ›
Lenders like to see evidence that you've successfully repaid credit before. If you haven't used credit before, or if you're new to the country, there might not be enough data for lenders to approve you. You have late or missed payments, defaults, or county court judgments in your credit history.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750.
What credit score is needed to buy a house? ›
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
What's a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
What credit score is needed to buy a car? ›
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
Which credit score is most important, Equifax or TransUnion? ›
Neither your TransUnion or Equifax score is more or less accurate than the other. They're just calculated from slightly differing sources. Your Equifax credit score is likely lower due to reporting differences. Nonetheless, a “fair” score from TransUnion is typically “fair” across the board.
What is the difference between FICO and TransUnion? ›
The Bottom Line. FICO provides a single-number credit score, while major credit bureaus like Equifax, Experian, and TransUnion (not covered in this article) offer a more detailed look at an individual's credit history along with the score.
Is Equifax or TransUnion better? ›
TransUnion vs. Equifax: Which is most accurate? No credit score from any one of the credit bureaus is more valuable or more accurate than another. It's possible that a lender may gravitate toward one score over another, but that doesn't necessarily mean that score is better.
Which credit report is most accurate? ›
Simply put, there is no “more accurate” score when it comes down to receiving your score from the major credit bureaus.
