Credit Education

03. Aug, 2016

What is the difference between the 3 Bureaus?

Experian, Equifax, and TransUnion are names of the three main credit bureaus in the USA. They share a common mission but have a number of differences in operating methods.

These credit bureaus receive citizens’ credit history data from banks, credit card companies, and other financial institutions. They use this information to compile credit reports that show each person’s financial status over several years. The reports include details of timely and delayed loan payments and defaults on loans. They also show debts to banks, credit card companies, bankruptcies, and other financial events. These reports allow everyone to get a credit status summary that helps in personal financial planning. Report recipients see where action is needed to improve their credit status.

The credit bureaus make individuals’ credit report information available to prospective lenders or employers on request. The data they supply indicates the credit status of a loan seeker or job applicant. Besides the credit report information, the bureaus calculate a three digit credit score for each credit history. This score helps lenders decide who is a good or bad credit risk.  

Why Not a Single Credit Bureau?
Some may wonder why we need three credit bureaus to analyze the nation’s credit data. Would it make more sense to have a single credit bureau deliver a nationwide service?

The Fair Credit Reporting Act (FCRA) encourages more uniformity in how these credit bureaus operate, but this is far from unity. The ‘single bureau’ idea may have merit, but it raises concerns about monopolies. Some credit experts bemoan how smaller, independent credit bureaus fail to compete with their big three rivals.  

There are plusses and minuses to each of their approaches. One big bureau following a single credit assessment method would not satisfy those who believe the other methods are fairer or produce clearer results. Today’s situation gives an element of choice to credit report subjects and seekers of credit history information.

Key Differences
One difference between the leading bureaus is while they operate nationally, their presence is stronger in some regions and cities. Another difference is found in the credit history each bureau gathers. They also can use different methods to compile credit scores, and they have separate credit score scales. For example, Equifax uses a credit score range from 280 to 850; TransUnion uses a credit score scale from 300 to 850; PLUS Score uses a 330 to830 range. In all cases, higher scores represent better credit, but boundaries between good and bad credit are not identical.

One Person – Three Credit Scores
The particular way each credit bureau operates leads to variations in credit score calculations for the same person. Anyone comparing credit scores between bureaus needs to check if each one calculates the same way. Even if they use identical scoring models, the scores might differ. This divergence comes from data they use and how they calculate scores.

Remember: some financial institutions report to only one or two bureaus. Suppose Mrs. Jones builds credit card debts. She receives a credit report from Equifax, but the credit card company only supplies her credit history to Experian. Equifax lacks this information, so it will not influence her credit report and credit score. The same applies if a bank with good credit history does not report to Equifax; Mrs. Jones’s credit report and credit score won’t improve.

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