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 (only available to Discover cardholders).
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
Credit reporting companies, also known as credit bureaus or consumer reporting agencies, collect and store financial data about you that is submitted to them by creditors, such as lenders, credit card companies, and other financial companies. Creditors are not required to report to every credit reporting company.
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.
What are the 3 different credit bureaus? ›
The three major credit bureaus are Equifax®, Experian® and TransUnion®. Credit bureaus are different from credit-scoring companies, such as VantageScore® and FICO®.
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.
Can I be removed from credit bureau? ›
However, paying back the money that you owe to your Creditors is also not enough to have your name cleared from the credit records. You still need to seek help from legal practitioners to assist you in approaching your creditors for consent to remove such listings.
What is the difference between a credit score and a credit bureau? ›
Credit bureaus gather similar types of data and use that information to help generate a credit score, which is a three-digit number that reflects your creditworthiness. To calculate this, they use either the VantageScore model or the FICO model.
What happens when you get reported to the credit bureau? ›
Credit bureaus sell the information in your report to businesses that use it to decide whether to loan you money, give you credit, offer you insurance, or rent you a home. Some employers use credit reports in hiring decisions.
Is 700 a good credit score? ›
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. In 2023, the average FICO® Score☉ in the U.S. reached 715.
What will fail a credit check? ›
There are a number of reasons why you may fail a hard credit check when formally applying for new lines of credit or loans - here are the main ones: Low credit score. High debt-to-income ratio. Inaccurate information (personal or otherwise)
Which credit bureau is best? ›
Which of the 3 Credit Bureaus Is the Best? 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.
The highest score you can have on the most widely used scales is 850. According to data from FICO, about 1.7% of all FICO scores were at the coveted 850 as of April 2023. And even if you do get there, the fluctuating nature of credit scores means you're unlikely to keep it month after month.
Which credit score is accurate? ›
There is no single credit score that's considered the most accurate. The truth is, there are several types of credit scores available to lenders—and many versions of each of those scores. Scores are calculated based on many of the same factors. But thinking of these scores in terms of accuracy can still be misleading.
How do I know I'm blacklisted? ›
Blacklisting typically occurs when an individual fails to meet their financial obligations, resulting in negative consequences such as being unable to secure loans, credit cards, or even opening a bank account. To check if you are blacklisted, you can receive an annual complimentary credit report.
What can a credit bureau do? ›
Credit bureaus provide some of the information creditors and lenders use to help them make important lending decisions. While credit bureaus collect credit information in order to make it available to certain third parties, the decision to deny or approve someone credit ultimately lies with the lender or creditor.
How long does Blacklist last? ›
If you are blacklisted, it will be very difficult to get approved for new credit products. You may also be charged higher interest rates and fees if you are able to get approved. Blacklisting can stay on your credit report for up to seven years, making it hard to rebuild your credit.
Which credit bureau do they check? ›
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.
How do credit bureaus identify you? ›
Your name, address, Social Security Number, date of birth and employment information are used to identify you. Your PII is not used to calculate your FICO Scores. Updates to this information come from information you supply to lenders when you apply for new credit.
What is the main responsibility of the 3 credit bureau? ›
The three major credit bureaus are Equifax, Experian and TransUnion. The credit bureaus manage records on your accounts, balances and the payments you make. Each credit bureau operates independently. They may have different information for each individual and assign different credit scores.
