Credit bureaus act as information brokers for individual consumer credit histories. The three major credit bureaus, Experian, Equifax, and TransUnion, sell their services to banks, mortgage lenders, credit card companies, retailers, and other businesses that grant credit.
Key Takeaways
- Credit bureaus make money by selling credit reports, data analytics, marketing and consumer analytics.
- The three major U.S. credit bureaus are Experian, Equifax, and TransUnion.
- Credit bureaus primarily collect credit information from furnishers about consumers payment histories, then compile that information into a report.
- The credit bureaus also make money by selling anti-fraud services directly to individual consumers.
How Credit Bureaus Make Money
Credit bureaus make money by selling information like consumer credit reports and data analytics to other companies.
The three major U.S. credit bureaus are Equifax, Experian, and TransUnion. They each gather and sell information about the creditworthiness of individuals, but they can interpret the same information in different ways. That is why you may have different FICO scores at different credit bureaus.
Your credit report also includes personal information like your name, birthdate, address, and Social Security Number (SSN).
Businesses that grant credit provide information to the bureaus for free,but they also pay to buy credit information. What they're buying is the broader compilation of data that the credit bureau has collected, which can include hard and soft inquiries, bankruptcies, or collections actions, in addition to repayment and debt history.
Credit bureaus collect, aggregate, synthesize, and analyze a large quantity of information sent to them by businesses that provide credit. When they sell that information as a whole, or in an analyzed form, they can make money.
Products Credit Bureaus Sell to Make Money
Credit bureaus sell four main data products to make money. They include: credit services, decision analytics, marketing, and consumer assistance services.
Credit Services
Credit bureaus are perhaps best known for providing credit reports. The credit bureau receives a request from a lender for an individual consumer's credit report, and the bureau sends it to the lender and charges a fee.
The bureaus also sell you copies of your own credit reports. However, the Fair Credit Reporting Act (FCRA) states you're entitled to one free credit report from each bureau every 12 months. In the wake of numerous data breaches, all three credit bureaus have changed their policies to offer one free credit report every week permanently. You can request your free reports at AnnualCreditReport.com.
Your credit report will not include your credit score, which is provided by another company. FICO provides the most commonly used credit score. To obtain your credit score, you can sign up for a one-credit bureau plan for free or pay a fee to see your credit score for all three bureaus.
Decision Analytics
Credit bureaus can provide lenders with an augmented credit report that not only includes a detailed transaction history but also analytics about the ways an individual habitually handles debt. Lenders pay more for these reports.
Marketing Support
Many lenders send out direct marketing materials that are targeted to customers who are pre-approved for credit. The credit bureau provides them with lists of likely candidates for these marketing campaigns.
Consumer Services
Credit bureaus offer services directly to consumers, including credit monitoring, identity theft protection, and fraud prevention. These services help reduce the risk of identity theft.
What Data Is Included in Your Credit Report?
The credit reports that credit bureaus sell to make money contain a range of financial information about you. First, it includes information from lenders about your payment history, including whether you've made each payment on time, or how many missed payments you've had in recent years.
Negative information generally stays on your credit report for about seven years. If you've filed for bankruptcy, that event may stay on your credit report for up to 10 years.
Your credit report includes information about the types of accounts you have, or your credit mix, such as installment loans like mortgages and personal loans as well as revolving credit accounts like credit cards.
If you've filed for bankruptcy, that will be included in your credit report, along with any actions taken by collections agencies. Lenders often like to be aware of bankruptcies and collections actions because they indicate that a borrower is a greater credit risk.
Finally, your credit report will include both hard and soft inquiries. A hard inquiry is made when you officially apply for credit, such as when you apply for a personal loan or mortgage. A soft inquiry is made when a company may want to collect data on you, when you apply for a pre-approval, or when you pull your own credit history. A hard inquiry can negatively impact your credit score, while a soft inquiry has no impact on your credit score.
Can You Dispute Inaccurate Information on Your Credit Report?
By law, you're allowed to dispute inaccurate information on your credit report. Then, according to the Fair Credit Reporting Act, the credit bureaus must conduct a free investigation and correct any errors it finds.
How Do I Get a Copy of My Credit Report?
You can get a copy of your credit report at AnnualCreditReport.com. You are entitled to one free copy of your report every 12 months from each of the credit bureaus. Check to make sure the information in the report is accurate. You may have to pay for other information, such as your credit score.
What Are Other Credit Bureaus Besides Experian, Equifax, and TransUnion?
Equifax, Experian, and TransUnion are the major credit bureaus in the U.S. Others include ChexSystems, which collects data on checking and savings accounts, and Comprehensive Loss Underwriting Exchange (C.L.U.E.), which collects insurance information for personal property. The National Consumer Telecom and Utilities Exchange (NCTUE) collects and provides information for telecom companies.
The Bottom Line
Credit bureaus make money by collecting, storing, and analyzing your financial information, which they sell to creditors who may be deciding whether to grant you a loan or market to you. Understanding how credit bureaus collect and use your information can help you make financial decisions that can help the credit bureaus (and in turn, lenders) view your information more positively.
