A credit bureau is a business that collects data about you and how you have used credit in the past. There are thousands of different credit score companies that all analyze the same data differently. The three major credit bureaus are Equifax, Experian, and TransUnion. Although they are similar in function, the major credit bureaus have small differences that can slightly change your credit score. Usually, the differences are negligible if you have good credit but it is still important to understand that there can be variation between bureaus.
Experian is one of the three major credit bureaus that provide reports outlining consumers’ borrowing habits. Any creditor such as mortgage companies, credit card companies or auto insurance companies reports outstanding debt and payment history to Experian as well as Equifax and TransUnion. Experian also has its own numerical scoring model known as Experian PLUS, which offers a credit score from 330 to 830. These scores correlate strongly with FICO scores but their algorithms are slightly different so scores can differ slightly between the two methods.
Experian provides a detailed credit report rather than a simple number which gives more insight into the spending history of a person. Lenders can look at borrowers’ credit history and how they have handled debts in the past before determining whether to extend credit or not. This is important because two people can have the same score but be vastly different borrowers which the lender needs to consider before taking any further action.
The main disadvantage of Experian is that it is rarely used as the only tool when assessing credit. Lenders usually want to see reports from all three bureaus to get the most information about the borrower and whether they would be a risk or not. Borrowers should generally review all three reports to ensure that there is no misinformation in any of them.
Equifax is another major credit reporting bureau. It produces a similar report to Experian and follows a similar format. Equifax reports are detailed and easy to read. Lenders can see any payment clearly from the past to determine the eligibility of the borrower. Equifax reports also indicate debts owned by collection agencies and collateral against the borrower’s assets.
Equifax offers numerical credit scores that range from 280 to 850. The bureau uses similar criteria as FICO to calculate these scores but the exact algorithm is not the same. However, like Experian, a high Equifax score usually signifies a high FICO score. It is always important to check your credit score for potential irregularities you can dispute with the credit bureau.
The advantages of Equifax are similar to that of Experian. The bureau provides detailed reports and provides lenders with deeper information about a consumer’s borrowing habits. Borrowers can determine their likelihood of loan approval based on their Equifax report. However, if your Equifax report is much better than your Experian report you can find lenders that prioritize Equifax reports.
TransUnion is the third major credit bureau. TransUnion is the smallest of the three credit bureaus but provides the most in terms of business services. TransUnion also offers a credit score similar which helps you improve your credit score and you can see how your credit score is affected by certain changes to your credit. TransUnion also provides detailed credit reports that provide the most in-depth employment information out of the three.
TransUnion has a credit scale of 300 to 850 to determine your credit health. TransUnion also uses similar algorithms to determine credit score but they can differ slightly from your other scores. It is best to track your credit score between all three bureaus to see if there are any inconsistencies between the three. Making sure your credit score is consistent will show you are a reliable borrower and can handle debt.
The advantages are similar to those of the other two, as TransUnion provides in-depth reports about your credit history. TransUnion is also helpful for managing your business because it provides the most amount of services that help track your credit and model it to see how certain decisions will impact your credit.
The main difference between the three is the variations in scores and credit reporting that may occur among the credit bureaus. The algorithms they use to generate your credit score may differ but the data that they collect is usually the same and a good credit score in one will generally mean a good credit score in the other two. When making credit decisions make sure to get all three bureaus checked to ensure that you are in a strong position to get your credit.