In your financial journey, credit can be a major player in your life.
And while you might be familiar with a credit score or credit report, you may not understand the credit bureaus who work behind the scenes compiling that information.
What are these mysterious credit bureaus? And more importantly, what role do they play in your life?
Here’s everything you need to know about credit bureaus. And, how they could determine your financial future.
What are the big 3 credit bureaus?
The first thing you should know is that there isn’t just one credit bureau. There are actually three credit bureaus: Experian, TransUnion, and Equifax.
However, Nancy Bistritz, Director of Public Relations and Communications at Equifax notes that “There are smaller agencies, but almost all of them get information from one or more of the three national credit reporting agencies.”
“National credit reporting agencies adhere to the requirements of the Fair Credit Reporting Act,” adds Bistritz.
Although there are three credit bureaus, they all perform similar functions and provide credit reporting services for consumers.
“A credit bureau or credit reporting agency collects information relevant to people’s credit and financial history and then uses proprietary algorithms to develop a credit report that helps potential lenders rate borrowers’ reliability,” says Heather Battison, Vice President of TransUnion.
And while the three big credit reporting agencies are similar, they’re not really the same.
Bistritz says that all of the credit reporting agencies have their own credit scoring models. They also have their own additional products and services they may offer to consumers.
What do credit bureaus do?
You may not realize it, but credit bureaus play an important role in your financial life.
They help compile data that lenders use every day via your credit report. Each of the three credit bureaus also provides a credit report. It essentially has a lot of information about your personal credit history.
According to Battison, credit reports contain a variety of information, including:
- Identifying information (name, address, birthdate and social security number)
- Employer history
- Consumer statement
- Account information
- Public records
All of the information in your credit report is used when calculating your credit score.
Your credit report and credit score are used in many situations. For example, getting approved for an apartment rental, credit card, car loan, and more.
Ultimately, credit bureaus act like a hub for credit information and a middleman between the lender and individuals.
“A credit bureau, like Experian, gathers information from thousands of organizations and organizes the information so that it can be used to assess lending risk,” says Rod Griffin, Director of Public Education at Experian.
If a lender wants to get a clear picture of your creditworthiness, they will look to your credit report, which the credit bureau will provide.
The good news is that credit reporting agencies help lenders make objective decisions based on your credit history. Not on other factors.
“Before credit reporting, lenders might approve a loan because they knew the applicant’s father, or they might have declined a loan because they didn’t like the color of a person’s skin,” explains Griffin.
The credit report agencies now provide all of a borrower’s data. So lenders can look at past credit history and base approval on financial information and behavior, rather than on other factors unrelated to your finances.
What makes the 3 credit bureaus different?
You may wonder, if all three credit bureaus do the same thing, why are there three of them and not just one?
“A good analogy is the three major U.S. auto manufacturers: Ford, General Motors, and Chrysler,” says Griffin. “All three manufacture automobiles. The cars have engines, four wheels, and a steering wheel.”
“But cars from each company differ in many ways,” Griffin explains. “Styling, engine design, price point, available colors, size, economy, and so on. The national credit reporting companies are similar.”
Each of the credit bureaus has their own reporting systems. They also use their own proprietary algorithms to create a credit report and credit score.
How do the 3 credit bureaus affect my life?
The three credit bureaus work to help lenders get the information they need about potential borrowers while offering consumers an accurate picture of their credit history.
However, it’s important to note that not all businesses share the same information with credit agencies.
“Not all creditors report to all three credit agencies,” says Battison. “So the information in each report can vary, resulting in different scores.”
In other words, if you check out all three credit reports, they may have different information that can result in different credit scores.
While this may seem odd, lenders often work with the credit reporting agencies that fit their needs.
“Lenders and other businesses determine which credit reporting company or companies they work with based on their specific needs, just like a person buying a car purchases it from the company that builds the vehicle most suited to their needs,” says Griffin.
So even though your credit history may vary among the three credit reports, they still give an accurate picture of your creditworthiness.
How do I check my credit?
The good news is you can check all three credit bureaus’ credit reports for free once a year at AnnualCreditReport.com.
It’s a good idea to check your credit report annually to make sure everything is correct. And, to help you prevent identity theft.
It may also be a good idea to check your credit report before applying for a mortgage, buying a car, or making any other big financial decisions.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.54% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|