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What is a Credit Bureau?

You may know a lot about how to build and manage your credit, but do you know who the gatekeepers of credit reports are, and how they operate? Understanding how credit bureaus work and why they are important is an integral aspect of a healthy financial life.

Katana Dumont • June 23, 2021

Whenever you apply for a loan or line of credit, lenders want to know how risky a borrower you might be. To help them figure out what the chances are that you’ll repay the money they lend you, they rely on credit bureaus to analyze your history of borrowing. 

Credit bureaus, also called credit reporting agencies, collect and maintain your credit information and history. They then sell this information to lenders and other businesses who, in turn, will decide if you’re a reliable borrower. 

Knowing what credit bureaus are and how they work can help you better understand your credit history and overall creditworthiness.

In This Article

  1. What Does a Credit Bureau Do?
  2. Common Misconceptions About Credit Bureaus
  3. What Are the 3 Major Credit Bureaus?
  4. How to Dispute Errors and Fraudulent Activity With Credit Bureaus
  5. FAQs
  6. Final Thoughts

What Does a Credit Bureau Do?

Credit bureaus are important because they partner with lending institutions and credit issuers to help them determine your creditworthiness, which can determine loan decisions, lease agreements,  jobs, and other financial services.

A credit bureau’s main purpose is to ensure that creditors have the information they need to make lending decisions. Credit bureaus can also run a public records check to see if you’ve had any bankruptcies, civil lawsuits, foreclosures, tax liens, and other types of collection accounts. All of this information is then put into a document known as a credit report to help lenders gain a clearer picture of your credit history.

Common Misconceptions About Credit Bureaus

With many financial foundations and services, there tends to be a lot of misinformation out there that can hurt you financially if you don’t educate yourself. Check out some of the most common misperceptions surrounding credit bureaus and credit reports.

 

Myth #1: Credit Bureaus Make Lending Decisions

A common misconception about credit bureaus is that they make lending decisions. But the truth is credit bureaus have no say in whether or not someone’s credit is approved or denied for a loan. Credit bureaus merely collect and arrange information about an individual’s credit score and give that information to lending institutions. The decision to deny or approve ultimately lies with the lender or creditor. 

 

Myth #2: You Have to Pay to Get a Copy of Your Credit Report

In 2003, the Fair and Accurate Credit Transactions Act (FACTA) updated the Fair Credit Reporting Act to allow consumers to request a free copy of their credit report from each credit bureau once every 12 months. It also gave them the right to purchase a credit score, complete with information as to how that score was calculated.

Credit bureaus are also required to provide an additional free credit report in the following instances:

  • You’ve been denied credit or a benefit as a result of information on your credit report within the last 60 days.
  • You’re unemployed and seeking employment.
  • You’re on public assistance.
  • You’re a victim of identity theft.

 

Myth #3: All Credit Reports Are the Same 

All credit reports are not exactly the same. Each of your credit reports may contain different information. 

There are a few reasons why your credit reports are different, one being that each credit bureau only has the information that gets submitted to it. Not all creditors report account information to all 3 bureaus, so credit bureaus can have different information. Also, there are many different credit scoring models used by credit bureaus, so it’s common to have different credit scores across all 3 bureaus. 

What Are the 3 Major Credit Bureaus?

The top 3 credit bureaus in the U.S. are Experian, Equifax, and TransUnion. Although there are several others, these 3 are regarded as the 3 major credit bureaus. The information these credit bureaus collect is commonly used in the following ways:

  • To calculate credit scores
  • To make lending decisions
  • In some pre-employment background checks
  • To evaluate lease applications
  • In setting insurance rates

In addition to using FICO scores, these 3 bureaus have also combined to create their own credit score, the VantageScore. Both scores are calculated on a range from 300 to 850. However, the biggest difference lies in what information is used and how it’s weighted. In general, FICO scores place more emphasis on payment history while VantageScore looks more at how much of your credit limit you’re using and what types of credit you have. 

As a result, your credit score may vary between the 3 major credit bureaus — even if all of your creditors report to all 3. 

 

Did you know?

We offer a credit card that can help raise your credit score!¹ The Chime Credit Builder Visa® Credit Card² is our no annual fee, no interest, secured credit card that helps you build your credit.

How to Dispute Errors and Fraudulent Activity With Credit Bureaus

Make sure to carefully review your credit reports and to contact a credit bureau directly to dispute any inaccurate information you’ve found in your report. Information that is inaccurate or incomplete may not only impact your credit scores, but it could be a sign of potential identity theft

If you have reason to believe that you’re a victim of identity theft, you can reach out to any of the credit bureaus to place a fraud alert or credit freeze on your credit report. A credit freeze restricts access to your report, which makes it hard for an identity thief to open a new credit account in your name. This service is often free, and you can lift the freeze at any time. A fraud alert works in a similar way, and it stays in effect for one year. 

If you find information you believe is inaccurate, incomplete, or fraudulent on one credit report, it’s definitely a good idea to review your credit report from the other bureaus as well. 

FAQs

How do I contact a credit bureau?

To get in touch with a credit bureau or order your credit report, go to the individual website of the company and follow their specific directions. Some companies have separate forms for requests by postal mail.

Try contacting the respective institution(s) directly for help. The 3 major credit bureaus’ contact information can be found below:

Equifax, 866-349-5191 

TransUnion, 800-680-7289 

Experian, 888-397-3742 

How many credit bureaus are there?

There are a number of credit bureaus currently operating in the U.S. In addition to the 3 major ones—Equifax, Experian, and TransUnion—there were about 400 consumer reporting companies in America, as of 2012, according to the CFPB

These smaller bureaus, such as Clarity Services, ChexSystems, and MicroBilt/PRBC, also provide reports that lenders can use to help make decisions.

What is a credit bureau report?

The details in your credit report are used to generate your credit scores, including FICO scores and VantageScores. The typical data found on credit reports includes your personal and financial information, such as credit account information, payment history, balance of an account, when the account was opened, date of the last activity, high credit on the account, and the credit limit on the account. It also might include public records such as bankruptcies and debt collections.

Final Thoughts

While credit bureaus don’t have the authority to approve or deny a borrower, their role as the credit information keepers is very significant. It’s important that you understand the basics of how credit bureaus operate so that you can be a better-informed borrower. Always review your credit reports diligently and get in touch with a credit bureau right away if something seems off.

Banking services provided by The Bancorp Bank or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Chime Visa® Credit Builder Card is issued by Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see back of your Card for its issuing bank.

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1 On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

2 To be eligible to apply for Credit Builder, you need to have received a qualifying direct deposit of $200 or more to your Spending Account within the last 365 days of your application. The qualifying direct deposit must have been made by your employer, payroll provider, or benefits payer by Automated Clearing House (ACH) deposit. Bank ACH transfers, Pay Friends transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, and cash loads or deposits are not qualifying direct deposits.

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