Are you applying for a credit card, personal loan, auto loan, or mortgage soon? If you want to know what the creditor or lender will see when they access your file, it’s ideal to review your credit reports and scores with the credit bureaus.
But which one should you check first? It depends, and you should know that not all credit reports and scores are the same. So, it’s best to access your credit reports and scores with all three, compare the data and dispute any inaccuracies.
Read on to learn more about credit bureaus and how they work, how they calculate credit scores, why scores differ, and how to check your credit rating.
What Are Credit Bureaus?
Also known as credit reporting agencies, credit bureaus gather and retain consumer financial data. This information is used to create credit reports and generate credit scores for lenders, creditors, and other financial institutions to make lending decisions when potential borrowers apply for their debt products.
Credit bureaus sell credit reports to creditors and lenders. However, consumers are entitled to a free copy of their credit report from the three major bureaus every week per the Fair Credit Reporting Act (FCRA) that mandates credit bureaus.
How Do Credit Bureaus Work?
Credit bureaus get most of their information from data furnishers or companies with whom consumers do business. They include credit card issuers, lenders, loan servicers, banks, credit unions, and collection agencies. The data is organized into sections by the credit bureaus to generate a credit report.
Generally, data furnishers communicate the current balance, account status and share if the bill was paid on time to the credit bureaus each month. Credit bureaus also maintain public records, including bankruptcy filings, in the consumer credit files. But this data isn’t provided by data furnishers as credit bureaus gather it from public records provided by the courts.
Credit bureaus store loan and credit card information in their databases for seven years if the account was closed in poor standing. But if the account was closed in good standing, it’ll remain on your credit report for ten years. However, bankruptcies can remain on your credit report for ten years from the filing date.
How Are Credit Scores Calculated?
Credit scoring providers, like FICO and VantageScore, use data in your credit report to calculate your score. It’s essential to ensure the accuracy of your credit profile’s contents to ensure no errors or outdated information appears. Doing so gives you the best chance at a good or excellent credit score.
There are two primary credit scores to be mindful of – the FICO Score and the Vantage Score.
Approximately 90 percent of top lenders use the FICO-scoring model to make financing decisions. Here’s how FICO calculates your score:
- Payment history: 35 percent
- Amount owed (or credit utilization): 30 percent
- Length of credit history: 15 percent
- Credit mix: 10 percent
- New accounts: 10 percent
The Vantage Score is another relatively popular scoring model that helps assess your credit risk. It comprises these components:
- Total credit usage, balance, and available credit: extremely influential
- Credit mix and experience: highly influential
- Payment history: moderately influential
- Age of credit history: less influential
- New accounts opened: less influential
What Are The Main Three Credit Bureaus?
The main three credit bureaus are Experian, TransUnion, and Equifax. They offer credit reports, credit scores, credit monitoring services, identity theft protection, credit support services, and educational resources for consumers.
Experian also features a free service called Experian Boost to help you raise your credit score instantly.
Why Do Credit Scores Differ Between Credit Bureaus?
When you check your credit score, you may be surprised to find the scores differ between credit bureaus. However, this isn’t uncommon as your score is based on what’s in their respective report, and not all data furnishers report to all three credit bureaus. Consequently, one or two bureaus may have data on select accounts that the others don’t.
Another factor that can cause discrepancies between credit scores is timing. Credit scores are a snapshot of your credit file at that particular moment. If data is current with one credit bureau and not the other, your credit scores will likely differ. Or, if you recently applied for credit and reports were pulled from only one or two bureaus, the credit bureau that didn’t generate the inquiry may have the higher score.
There are also several variations of your FICO score, which could cause varying credit scores across bureaus. More on that shortly.
Do You Need All Three Scores?
It’s a good idea to know where your credit scores stand with the three credit bureaus. And if you plan to apply for credit soon, you want to know which credit score the lender or creditor uses before applying. That way, you can improve your credit rating to get better terms or if you don’t quite meet the qualification criteria.
Which Credit Report Do Lenders Look At?
There’s no way to know which credit report lenders look at unless you ask. When inquiring, it’s equally important to ask which version of the FICO Score they consider when making a lending decision. These could include one of the following:
- FICO® Score 2: used by Experian for mortgage lending
- FICO® Score 3: used by Experian for credit card approvals
- FICO® Score 4: used by TransUnion for mortgage lending
- FICO® Score 5: used by Equifax for mortgage lending
- FICO® Score 8: most widely used versions by Experian, TransUnion, and Equifax
- FICO® Score 9: the other most commonly used version by Experian, TransUnion, and Equifax
- FICO® Auto Score 2: used by Experian for auto lending
- FICO® Auto Score 4: used by TransUnion for auto lending
- FICO® Auto Score 5: used by Equifax for auto lending
- FICO® Auto Score 8: used by Experian, TransUnion, and Equifax for auto lending
- FICO® Auto Score 9: used by Experian, TransUnion, and Equifax for auto lending
- FICO® Bankcard Score 2: used by Experian for credit card approvals
- FICO® Bankcard Score 4: used by TransUnion for credit card approvals
- FICO® Bankcard Score 5: used by Equifax for credit card approvals
- FICO® Bankcard Score 8: used by Experian, TransUnion, and Equifax for credit card approvals
- FICO® Bankcard Score 9: used by Experian, TransUnion, and Equifax for credit card approvals
FICO recently released the FICO® Score 10, FICO® Auto Score 10, FICO® Bankcard Score 10, and FICO® Score 10T. However, these scores aren’t yet adopted by most lenders and creditors.
How to Check Your Credit Score
You can check your credit score with each of the credit bureaus by visiting their website. A small fee may apply to access your score and reports.
Another option is to sign up for CreditWorksSM Basic from Experian. It’s free and includes your Experian credit report and FICO® Score* with monthly updates, score tracking, FICO® Score*, alerts, Experian Boost to help improve your credit score instantly, and real-time credit monitoring of your Experian credit report.