Why Are There 3 Credit Reporting Agencies?

If you have good credit, chances are you never think twice about your credit score or the companies responsible for contributing to that score. But while many people believe only three credit reporting bureaus exist in the United States---Equifax, Experian and Transunion---the truth is that thousands of them are out there collecting your financial information.

History

Credit reporting bureaus began when small groups of merchants began exchanging financial information about their customers. These groups grew and consolidated over the years into credit bureaus. While many companies that report financial information exist today, most creditors are only interested in the information collected by the three largest credit reporting companies: Equifax, Experian and Transunion. Equifax, the oldest of the three, was created in 1899. Its original name was Retail Credit Company, and it collected every type of information about people imaginable, including marital problems, sex life, political activities and so forth, whether true or merely rumored. This information could then be requested by anyone who paid for the report. Only negative financial information was originally reported, and consumers had no right to see what was in their files. This changed in 1971, when the Fair Credit Reporting Act was passed into law.

Identification

The phrase "credit bureau" is somewhat misleading, as "bureaus" are often thought of as governmental entities. However, credit bureaus are in no way connected to the United States government. All credit reporting companies are private businesses to which creditors report your financial information.

Considerations

Experian, Equifax and Transunion are the three credit bureaus known to most people because they are the ones used most often by major creditors in determining consumers' creditworthiness. These same creditors report their customers' financial information to these same credit bureaus, which perpetuates the system. Not all creditors report to all three agencies, nor do all creditors obtain reports from all three agencies. However, it is in the best interests of the consumer to ensure that the information contained on all three reports is accurate. Do not make the mistake of thinking the credit bureaus are on your side: You are the only one who really cares whether the information on your credit reports is accurate.

Misconceptions

Along with the perception that credit bureaus are run or sanctioned by the U.S. government, many people believe that correcting the information contained on one credit report will correct it on all three. This is incorrect because each credit bureau is a separate entity, so you must file separate disputes with all three.

Tips

If you send documentation to a credit bureau or creditor when attempting to dispute negative information, keep the original document and send only copies. Big businesses are notorious for losing documents. The credit bureaus are supposed to send you a letter that states whether any changes have been made to your credit report as a result of their investigation. Be prepared to follow up with each credit bureau; do not assume that if you haven't heard anything that the disputed item has been removed. If the matter has not been corrected, additional documentation to support your position will be helpful. If you cannot get satisfaction through the credit bureaus, try directly contacting the company.