What You Need to Know About the Big Three Credit Reporting Agencies

What You Need to Know About the Big Three Credit […]

September 21, 2021

What You Need to Know About the Big Three Credit Reporting Agencies

Your credit report is more important than you realize. It can strongly impact your ability to get a job, your insurance rates, and your costs of buying a home or a car – even your ability to rent an apartment. Getting your credit firmly under control should be a priority, but there are a few things you need to understand about the major three credit reporting agencies first.

Who are the Primary Credit Reporting Agencies?

There are three companies that have the greatest degree of sway when it comes to credit reporting. They are:

  1. Experian
  2. Equifax
  3. TransUnion

While each company presents the information a little differently, with focuses and attention to different aspects of your spending and credit behaviors, they all offer a fairly accurate representation of your ability to repay and the likelihood of repaying your debt – largely based on past performance.

How do Credit Agencies Gather Information?

By building close ties with other industries in the credit world, the three agencies use a combination of the following information they gather to determine your ability to repay:

  • Utility payment history.
  • Bank loans and payment history.
  • Credit card debt. Payment history. Available balances.
  • Total available credit vs. debt.
  • Credit card limits.
  • Student loans – debt amount and payment history.
  • Mortgages (past and present).
  • Auto loans. Payment history. Amount owed.
  • Credit applications.

Because these agencies generally update credit scores monthly, it may take a few months for scores to change after major events occur. That is one reason that most people recommend you wait six months after making substantial positive credit and spending changes before applying for new credit, such as buying a home or a car.

Credit Agencies are not Infallible

While it is true that credit agencies have a great number of resources available to help them determine scores, mistakes are occasionally made when reporting credit. That is why you should take advantage of the access you have to a free credit report, once every 12 months from each agency, the Fair Credit Reporting Act allows you as a consumer. Review the credit report before applying for any major loan so that you know where your credit stands. This will help you get the best possible interest rates and may mean the difference between being denied a loan.

If there are mistakes in the report, take action to correct them. The first step is to notify the credit reporting agency, in writing, about the error. An investigation will follow with the possibility of clearing up the errors and inaccuracies once the investigation is complete. This will help you get the loans, apartment, or perhaps even job you are seeking.

Ultimately, while these credit reporting agencies may appear to have unlimited power for impacting your credit scores, they are still bound by laws and must abide by them when providing this deeply personal financial information about you. Understanding these laws and the information-gathering process can help you make informed decisions about using and applying for credit wisely.

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