Perhaps you’ve heard of the three major credit reporting agencies (also sometimes referred to as credit bureaus). They are Experian, TransUnion, and Equifax. But there’s a lot of confusion when it comes to what these credit bureaus actually do. What kind of information do they collect? Where does that information end up? Do they create credit scores or credit reports? And what’s the difference?
What do the Major Credit Reporting Agencies Do?
Credit reporting agencies collect and maintain the information that forms your credit history and ultimately, your credit report. That includes information about your existing credit accounts as well your payment history from a variety of financial institutions, including credit card companies, banks, mortgage companies and other lenders. Other businesses, like telephone and utility companies, also report information to credit bureaus. (Generally, though, these non-lending organizations only report late payments and other negative information).
These companies are all for-profit private companies and they do not share information with each other. That means each one may maintain somewhat different information about you.
Personal information – like your name, address, etc – as well as positive information (like the age of your various credit accounts) can remain on your credit reports indefinitely does not have a fixed expiration date. Most negative information remains on your credit report for 7 years. Here’s how long the negative information collected by the credit bureaus is likely to stay on your credit report:
- Bankruptcy: Ten years from the date of filing for Chapter 7 filings, seven years for Chapter 13 filings and seven years for each record marked as “Included in BK”
- Charge-offs (when a creditor or lender writes off the balance of a delinquent debt, no longer expecting it to be repaid): Seven years
- Closed accounts: Seven years if the account was paid late, no expiration date if the account was always paid on time
- Collection accounts: Seven years from the last late payment on the original account
- Inquiries: Two years
- Late payments: Seven years from the date of the late payment
- Judgments: Seven years from the filing date if paid; longer if unpaid
- Tax liens: Fifteen or more years if left unpaid, seven years from the date the lien is paid
Once they’ve collected the information, compiled your credit history, and generated a credit report, the credit reporting agencies sell that information back to the lenders, so that they can determine your creditworthiness. Based on that information, lenders can decide whether or not to lend to you, and if they do, what your interest rate should be. They may also sell that information (i.e. your credit report) to insurance companies, employers, and any other company that has “permissible purpose” to access consumer credit data. You are also able to see your credit reports either by purchasing one from one of the credit reporting bureaus or for free once a year from AnnualCreditReport.com, a federally mandated site. In addition, Credit.com’s Credit Report Card provides you an easy-to-understand overview of your credit history, along with your free credit scores.
Credit Reports vs. Credit Scores
The information in your credit reports is used to generate your three digit credit scores. Since there are three credit reporting bureaus, and the information collected by them can vary from bureau to bureau, your credit scores may also vary depending in which bureau they are using to ascertain your credit history. Beyond that, there a many different credit scoring models or formulas, which change from lender to lender. In fact, you’ve probably heard of FICO scores before – but you don’t have just one FICO score – you have dozens!