How Do Credit Report Agencies Obtain Their Information?

Credit Reporting Agencies

A credit reporting agency acts as an intermediary between you and creditors. Potential lenders are able to determine if you are financially responsible from your credit report, because the agencies report your credit history, showing how you handle credit and debt.

A credit reporting agency is also referred to as a credit bureau. Most creditors request a copy of your report from one of the big three -- TransUnion, Experian or Equifax.

How Credit Reporting Agencies Obtain Information

Credit reporting agencies obtain their information from creditors with whom you have done business in the past, and they also gather personal information from public records. According to Experian, creditors that supply information to credit reporting agencies have to follow credit reporting guidelines detailed in the Fair Credit Reporting Act, such as verifying that the furnished information is accurate and complete with specific account details. The information being furnished must be related to payments or payment history, tenancy, employment and past or present insurance claims. In addition, the business entity that supplies the information must include its name, address and phone number.

The Information

The information the credit reporting agencies collect from creditors is stored in a large database, and the agencies are responsible for updating your credit report each time something in your financial file changes. Most reported information remains on your report for up to seven years; a bankruptcy remains on your credit report for 10 years.

Errors

The information credit reporting agencies obtain from creditors is not infallible, so it's important to check your credit report at least once a year. The Fair Credit Reporting Act gives you the right to obtain a free copy of your credit report each year from all three credit reporting agencies (see Resources). An error on your credit report can cost you hundreds of dollars in high interest rates, or you may even be denied credit because of an inaccurate report.