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Buying a home, financing a car, or paying for a college education are all things that you'll probably want to do before you have all the cash on hand to complete the purchase in full. It's actually expected that you'll have to borrow or work on credit in these situations. You'll need to go to a bank or other lending institution to take out a loan - often a large one. How can these companies ensure that you can be trusted with their cash? It's because they have access to your credit history, and can see what sort of a borrower you'll be.
Your credit history is collected by companies called credit bureaus. These credit bureaus collect data about your habits into a credit report, often accompanied by a score that rates how creditworthy you are. Your credit report can transform your borrowing power for good or bad, and it's no surprise that credit bureaus are very powerful financial institutions.
You'll need to go to a bank or other lending institution to take out a loan - often a large one. How can these financial institutions ensure that you can be trusted with their money? That's because they have access to your credit history, and can see what kind of borrower you've been and predict what sort of borrower you'll be.
Your credit history is gathered and detailed by companies known as credit bureaus. These credit bureaus collect data about your habits in a credit report, often accompanied by a credit score that rates how creditworthy you are. Your credit report can transform your borrowing power for bad or good. It's no surprise that credit bureaus have become very powerful organizations.
How Credit Bureaus Gather Your Information
There are three credit reporting agencies (or credit bureaus) that are considered the leading agencies in the United States: Experian®, Equifax®, and TransUnion®. These bureaus compile your personal financial information and, using a variety of factors, develop a report and a score that essentially shows your loan and credit history and your rating as a borrower. The stores, lenders, and other creditors you deal with report this information to the credit bureaus. The information that's passed to the agencies include your name, address, previous address (if necessary - this depends on how long you've lived at your current address), your employer information, how many credit cards you have, and more. These are details that you provide to the company that is, in turn, reporting it to the credit bureaus. (For example of how you provide this information, if you apply for a retail credit card, the retailer will pass what's on your application along to the credit bureaus.) Depending on the size of the merchant or creditor, that personal information may be reported to all three of the major bureaus or to only one. This, in addition to the way they base their scoring model, is why your credit scores can differ from Experian, to Equifax, to TransUnion.
The Big Three Credit Bureaus
While there are a number of consumer credit bureaus in the United States, most credit information is gathered and maintained by the three largest national agencies:
These companies are technically competitors, but between them, they have records for almost two-thirds of the American population and have formed a trade organization called the Consumer Data Industry Association (CDIA) to establish reporting standards that they can all work with. Each of the "Big Three" collects consumer information in slightly different ways so they produce slightly different reports; additionally, not every data furnisher reports to every credit bureau.
Know Your Credit Rights
If you've ever had a credit card or applied for a loan, then it's highly likely that the Big Three have your information on file. How can you make sure that this information is accurate? Decades ago, credit agencies kept a tight lid on exactly what kind of information they possessed, and customers were left in the dark about why they were denied a loan. However, in 1970, the United States passed the Fair Credit Reporting Act (FCRA), which regulated the collection and use of consumer credit information and made it possible for people to view their credit standing and correct any errors that could damage their rating.
All of the consumer reporting agencies in the United States must comply with the FCRA and its 2003 amendment, the Fair and Accurate Credit Transactions Act (FACTA). Under the FCRA, credit bureaus must provide a consumer with his or her own information upon request; one of these reports can be obtained free every year. Customers are able to see who has requested their credit reports in the past and they're able to view and correct negative credit events that have affected their scores. Since there's always the possibility of error, it's important to view your annual credit report in order to address any possible issues that could affect you in the future.
Whether you're just starting out on the path of home ownership or have dealt with credit agencies many times before, your credit report is a vital tool to help you establish yourself as a trustworthy borrower. Getting a report from the Big Three is a very popular option, but it's far from the only one: there are dozens of other reporting agencies in the United States, including Innovis® (which is the fourth-largest bureau) and PRBC, which allows self-enrollment and independent reporting of alternative data that is not automatically reported to the other bureaus.
You can contact each bureau directly or you can request your free annual report from the www.AnnualCreditReport.com website established by the Big Three reporting agencies. For help in reviewing and understanding your credit score, you can call AmOne toll-free at 1-800-809-1107 to speak with one of our trained financial search specialists. We also have articles available on how you can improve your credit score and build your credit history. You can also complete our simple, online credit solutions form for AmOne's free service to instantly pair you with an ideal credit solution provider for your needs.