Credit Reports & Creditor Reporting Agencies

A few agencies collect information---lawfully---about your financial past and compile credit reports, any or all of which may play a large part in whether you may obtain credit because almost all lenders look at your credit history. Many companies may rate you as a credit risk, but only a few realistically matter. They all, however, report much of the same information, especially if you have missed any payments.

About the Agencies

In the United States, the major credit reporting agencies are Equifax, TransUnion and Experian. A fourth, Innovis, mainly sells business credit reports and as of 2011 is not truly ready for the consumer market. The "big three" report all of the same information, such as bankruptcies and collection accounts, but they do not share information, so their credit reports may contain widely different data.

Misconception

The credit reporting agencies have little to do with credit rating formulas. Lenders calculate a credit score using an algorithm invented by the Fair Isaac Corporation (FICO) and pay to access information on your report from the credit rating agencies to get your score. The credit rating agencies have proprietary formulas, but these were created with the help of FICO, so the agencies pay a royalty every time a consumer buys a score from one of the "big three." The major agencies do not judge even really bad information, such as a collection account, because the credit agencies do not make credit decisions.

Considerations

Almost all information on your credit report comes from your lender, such as the limit on your credit card, the balance on the account and personal data, like your address and employer. Reports are not infallible and mistakes happen, so you should pull your own report and dispute any errors with the credit agencies. Sometimes, it is quicker to ask the lender to correct an error with the agencies.

Tip

You may not need a credit report with the traditional consumer credit agencies. Fifty million people have no credit profile, according to Bills.com. Alternative credit reporting agencies allow you to self-report payments, such as rent and utilities, which normally do not appear on a traditional report. The larger agencies have toyed with the idea of including rent and utilities---FICO even has a specialty score for people with no data---but it is best to build a traditional score as of 2011.